Downside scenario analysis.

Financial stress testing models what happens to profitability under adverse conditions - typically a 10-30% revenue drop. Shows whether the business survives and how long cash reserves last at stressed profitability. Essential for board reporting, banking covenants, and fundraising due diligence.

10M revenue drops 20% = 8M. Variable costs drop proportionally (40% of 8M = 3.2M). Fixed costs stay at 4M. Stressed profit: 8M - 3.2M - 4M = 800k. Still profitable - business survives a 20% downturn with positive margin. Cash reserve of 500k adds safety buffer for deeper scenarios.

Most businesses are fine with 10-15% revenue drops; 20-30% separates resilient businesses from fragile ones. Key variables: fixed cost ratio (higher fixed costs = more fragile), cash reserve (buffer for loss-making months), and customer concentration (one client leaving = major revenue loss).

A worked example

Try the defaults: revenue drop of 20%, current annual revenue of 10,000,000, annual fixed costs of 4,000,000, variable cost of 40%. The tool returns 800,000.00. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Revenue Drop %, Current Annual Revenue, Annual Fixed Costs, Variable Cost %, and Cash Reserve. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

The formula behind this

Stressed revenue = current × (1 - drop %). Variable costs = stressed × variable %. Profit = stressed - variable - fixed. Survival months = cash ÷ |loss| × 12. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

What the score tells you

Headline financial numbers — income, savings, debt — each tell part of the story. This calculation stitches several together into a single read you can track over time. The value is in the direction, not the absolute number.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.