Most founders build one financial model. They spend weeks getting the numbers right, defend it to their board, and treat it as a plan to execute. This is exactly backwards.
A financial model isn’t a prediction. It’s a tool for thinking through possibilities. And the most useful part of it isn’t the base case you built first. It’s the scenarios you run after.
The anchoring problem
Daniel Kahneman’s research on cognitive bias identified something called anchoring: once you see a number, it distorts your judgment about what the right number should be. The first estimate you encounter becomes a reference point that’s hard to escape, even when you know it’s arbitrary.
This is what happens with financial models. You set your monthly revenue growth rate to 15% because it felt reasonable the Tuesday afternoon you built the model. From that point on, 15% is the number. You evaluate everything relative to it. Beating 15% feels good. Missing it feels like failure. But 15% was never a fact. It was a guess.
Philip Tetlock studied forecasting accuracy for decades and found that the best forecasters share a specific habit: they think in ranges, not point estimates. They don’t say “growth will be 15%.” They say “growth will probably fall between 8% and 22%, with 15% as the most likely.” And they update those ranges as new information arrives.
A single financial model can’t capture this kind of thinking. Scenarios can.
What scenarios actually do
A scenario isn’t a copy of your financial model with different numbers pasted in. It’s a structured way to ask “what if?” and see the full consequences.
What if you raise $2M instead of $4M? That changes your runway, your hiring timeline, your product roadmap, and the dilution your existing shareholders take. A good scenario traces all of those consequences from a single change in assumptions.
What if the enterprise deal you’re counting on doesn’t close? Now your revenue curve looks different for the next 18 months. Does that change when you need to raise again? Does it change how many engineers you can afford?
What if you double the engineering team over the next two quarters? You can see the burn rate impact immediately. But you can also see the second-order effects: do you need to hire a VP of Engineering sooner? Does your office space still work? Does your runway shrink enough to force an earlier fundraise?
These aren’t hypothetical exercises. These are the actual decisions founders face every month. The financial model that helps you think through them is more useful than the one that predicts a single future.
How to present scenarios to your board
Most board presentations include one financial model and a narrative about why the numbers are achievable. This is a missed opportunity.
Try this instead: present three scenarios and the tradeoffs between them.
“Here’s our base plan. Here’s what happens if we grow 30% slower. And here’s what happens if we accelerate hiring by two quarters. The base plan gets us to profitability in Q3 2027. The conservative plan extends runway by five months but delays the product roadmap. The aggressive plan requires raising a bridge round in Q4 2026 but puts us in a stronger competitive position.”
This framing does something important: it shifts the conversation from “do we believe the numbers?” to “which tradeoffs are we willing to make?” The first question is unanswerable. The second is productive.
Board members who’ve seen hundreds of startup financial models know that no single projection is reliable. What they want to know is whether the founder has thought through the range of outcomes and has a plan for each one.
Three scenarios every startup should maintain
You don’t need twenty scenarios. You need three.
Base plan. Your best current estimate of how things will go. Not optimistic, not pessimistic. This is the plan you operate against week to week.
Conservative. What happens if growth is slower, deals take longer, and you don’t get everything you want. This isn’t a disaster plan. It’s what the world looks like if things go okay but not great. Use this to understand your true downside on runway and to identify the decisions you’d make differently.
Aggressive. What happens if you invest more heavily and things go well. Faster hiring, bigger product bets, earlier market expansion. Use this to understand what additional capital you’d need and what the return on that investment looks like.
The value isn’t in any one of these scenarios being right. The value is in comparing them. When you can see that the conservative plan gives you 22 months of runway and the aggressive plan gives you 11, you have a real decision framework. You can see exactly what you’re trading for faster growth.
From prediction to exploration
The best financial models aren’t the most accurate ones. Accuracy in early-stage projections is mostly an illusion anyway. The best financial models are the ones that let you explore consequences quickly.
When you change an assumption and immediately see how it ripples through your revenue, burn rate, runway, and cap table, you’re not forecasting. You’re thinking. And that kind of structured thinking, where you can ask “what if?” and get an answer in seconds, is worth more than any single projection you’ll ever build.
Stop defending your base plan. Start exploring your scenarios.