A new employee can increase capacity, but the cost usually starts before the expected revenue arrives. A scenario model helps you describe that gap and test which assumptions make the decision workable.

The purpose is to prepare for different outcomes. Scenarios are conditional calculations, not predictions. BDC's sensitivity analysis guidance describes testing how changing assumptions affects financial results.

Start with the decision and its timing

Write down the role, proposed start date, responsibilities and expected effect on capacity. Include recruitment, equipment, onboarding and the total employment cost appropriate to your location. Confirm payroll and employment assumptions with the relevant specialist.

Then explain how extra capacity becomes revenue. A delivery hire may increase the amount of work you can fulfil, but only if demand exists. A sales hire may need time to build a pipeline. These are different models and should not share an unexplained revenue multiplier.

Build three coherent scenarios

• Base: your current working assumptions about demand, productivity and collections.
• Downside: a plausible combination of slower sales, longer onboarding or later customer payments.
• Upside: stronger demand with the extra delivery and working-capital requirements included.

Keep a source, owner and review date beside important assumptions. Do not change only revenue while leaving all related costs and collection timing fixed unless that is genuinely what the scenario tests.

Look at cash as well as contribution

Here is a simplified illustration. Suppose the role adds €4,000 in monthly cash costs, plus €2,000 of initial equipment and onboarding costs. You expect incremental monthly customer receipts of €7,000, with other variable cash costs of €2,000. Once those receipts arrive, the incremental monthly cash contribution is €1,000.

If the first month's incremental receipts arrive a month later, while the €4,000 employment cost, €2,000 variable costs and €2,000 setup costs are paid in the first month, the initial cash requirement is €8,000. A model showing only a positive €1,000 monthly contribution would miss that timing issue. These figures are illustrative and exclude taxes and other business movements.

Define decision triggers

Before committing, agree what evidence would support the start date and what would require revisiting it. Examples include signed work, delivery utilisation or a minimum projected cash balance chosen for your own obligations. Avoid treating a generic threshold as suitable for every business.

Assign a person to monitor each trigger. A downside scenario is useful only if someone knows what to do when the assumptions begin to change.

Keep the model inspectable

Separate inputs, calculations and outputs. Show the effect on cash, profit and capacity over the relevant period. Change one variable at a time when testing sensitivity, and use combined changes when comparing complete scenarios. After the decision, compare the model with actual results and record what you learned.

Explore Finance Therapy's scenario planning tools or book a call to discuss the decision your model needs to support.