What is Sensitivity Analysis?
Testing how an outcome moves when one assumption changes - to find which inputs really drive the result.
Sensitivity Analysis: definition
Every model rests on assumptions, and some matter far more than others. Sensitivity analysis flexes one input at a time - price, churn, conversion, growth rate - to see how much the output (profit, NPV, runway) responds. It identifies the variables worth managing closely and exposes fragile assumptions where a small change swings the result. It differs from scenario planning, which changes several inputs together.
- Vary one input at a time to isolate its effect on the outcome
- Identifies the highest-leverage assumptions in a model
- Often shown as a data table or tornado chart
- Complements scenario planning, which flexes many inputs together
How Fintra handles it
Because Fintra planning is driver-based, you can flex a single assumption and watch the outcome update across the model - no manual recalculation. That makes it easy to see, for instance, how much a one-point change in gross margin or churn moves net income and runway, so attention goes to the assumptions that actually drive the business.
- Flex one driver and see the outcome update instantly
- Ranks which assumptions move the result most
- Feeds scenario and break-even analysis on the same model
Worked example
| Gross margin | Net income |
|---|---|
| 55% | $40,000 |
| 60% (base) | $90,000 |
| 65% | $140,000 |
Frequently asked questions
What is the difference between sensitivity analysis and scenario analysis?
Sensitivity analysis changes one input at a time to isolate its effect. Scenario analysis changes several inputs together to represent a coherent situation - such as a recession - with multiple assumptions moving at once. Sensitivity finds leverage; scenarios describe futures.
Why is sensitivity analysis useful?
It reveals which assumptions matter most, so management focuses effort where it counts and understands the risk in a forecast. It also exposes fragile plans that depend heavily on a single optimistic input.
What is a tornado chart?
A horizontal bar chart that ranks inputs by how much they swing the outcome, widest bar at the top - resembling a tornado. It is a common way to visualize sensitivity analysis and quickly spot the highest-impact assumptions.
How many inputs should you test?
Focus on the handful of assumptions most likely to vary and most influential on the outcome - often price, volume, margin, and a key cost. Testing every input dilutes attention; sensitivity analysis is most useful when it highlights the critical few.
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