If you liked what-if stories as a child, you’ll love multiple-scenario forecasts.

They start with a straight-line forecast in which you assume that your sales will grow by the same percentage next year as they did last year. Then you make up what-if stories and project their impact on your plan to create a variety of alternative projections.

You may try the following scenarios if they’re relevant to your situation:

1. What if a competitor introduces a technological breakthrough?
2. What if your company acquires a competitor?
3. What if Congress deregulates & regulates your industry?
4. What if a leading competitor fails?
5. What if your company experiences financial problems and has to lay off some of its sales and marketing people?
6. What if your company doubles its ad spending?

For each scenario, think about how customer demand may change. Also consider how your marketing program would need to change in order to best suit the situation. Then make an appropriate sales projection. For instance, if a competitor introduced a technological breakthrough, you may guess that your sales would fall 25 percent short of your straight-line projection.

The trouble with multiple-scenario analysis is that . . . well, it gives you multiple scenarios. Your boss (if you have one) wants a single sales projection, a one-liner at the top of your marketing budget. One way to turn all those options into one number or a series of numbers is to just pick the option that seems most likely to you. That’s not very satisfying if you aren’t at all sure which scenario, if any, will come true. So another method involves taking all the options that seem even remotely possible, assigning each a probability of occurring in the next year, multiplying each by its probability, and then averaging them all to get a single number.

For example, the Cautious Scenario projection estimates $5 million, and the Optimistic Scenario projection estimates $10 million. The probability of the Cautious Scenario occurring is 15 percent, and the probability of the
Optimistic Scenario occurring is 85 percent. So you find the sales projection with this formula: [($5,000,000 . 0.15) + ($10,000,000 . 0.85)] . 2 = $4,625,000.