Business Analytics · Intermediate level

Intermediate level · Module 4: Scenario Planning and Sensitivity · Lesson 1 of 3

Driver-Based Planning Models

Build a simple model where results flow from clearly stated assumptions.

In this lesson you will

  • Structure a model with inputs, calculations and outputs
  • Document assumptions and sources

Key concepts

driver-based modelinputsassumptionsoutputs

The lesson

A planning model links drivers to results: sales = customers × visits × basket; gross profit = sales × margin; profit = gross profit − fixed costs.

Keep inputs in one clearly marked block with their sources, calculations in another, and outputs at the top.

A model is only as good as its assumptions; documenting where each came from lets others challenge them.

Step by step

  1. List the drivers of branch profit.
  2. Set up input, calculation and output areas.
  3. Enter assumptions with sources.
  4. Check results with a hand calculation.

Practice activity

Build the branch profit model.

Expected result: A transparent model with documented assumptions.

Check your understanding

  1. Why keep inputs in one block?

    Show answer

    So assumptions are visible and easy to change and challenge.

  2. How should a model be checked?

    Show answer

    Against a hand calculation of the main result.

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