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One of the finest features in Microsoft Excel is sensitivity analysis using either a table (Excel 2003) or ‘What-if’ in Excel 2007. Suppose you want to begin a cybercafe or a restaurant in a new mall. You have done a study on the footfall and the kind of people who visit the mall. You have also found out with regards to the business atmosphere, security and rent or the straightout buy price. You also recognise the rates in the market that other businesses are charging, let’s say, for surfing the net per hour. You then estimate your capital costs like doing up the cybercafe and the price of the computers. You likewise use the Excel spreadsheet to estimate and calculate the number of people you’ll need to run the show and the amount of salaries you’ll have to pay. You have likewise approximated other variable costs like electricity and phone. From the above info in the Excel worksheet you may calculate your total on a monthly basis or yearly costs. Now based on a sure price that you will charge the customers, number of computers and working hours you may calculate your revenue per month or per year. From the info of revenue and income you may effortlessly calculate the profit. Till now everything was easy to implement in Excel. Now you determine to find out how your net income may vary if you vary the charge per hour or the number of persons who will visit your cybercafe or establishment. Of course, you cannot charge what you want but you may get a good estimate by observing what others are charging and what quality of service and environs they are providing. Arranging all your data properly, click on ‘Data’ in the ribbon in Microsoft Office 2007 or ‘Data’ in the menu bar in Excel 2003. In Excel 2007 select ‘What-if’ analysis and at long last ‘Data Table…’. In the popup window in the ‘Row input cell’ type the selective information that you have input horizontally next to the net profit and in the ‘column input cell’ write down the price and vary it it by 1% 0r 2% so that that Excel may carry out an analysis for, say., $0.5 per hour charge for a cybercafe to $1.5 per hour. The horizontal values may be the number of people per hour or month or year that will visit the shop and keep on varying the values by a sure approximated percentage. Click ‘OK’ and you may see how your net income varies with the number of clients and the price you charge. This is likewise known as a two variable table because you calculated the changes in your net income based on two parameters – price and number of customers. You may also do a single variable sensitivity analysis by selecting only one parameter. You may use the ‘Data’ and ‘Table’ feature in Excel 2003 to utilize the same analysis. The practical implementation of the above sensitivity analysis in the form of a training video may be found in the link below. |
