Goal Seek is a useful Excel tool that allows you to see how one data item in a formula impacts another, similar to a cause-and-effect scenario, providing an answer to the “what-if” question.
For example, let’s say your high-end apparel company is looking to go IPO once net profit percentage equals or exceeds 40%, and you are looking to identify a target sales number to communicate to your sales team.
Step 1: Identify the “target goal” in your financial statements.
In this example, “what-if” the net profit is 40%?
Step 2: What needs to happen?
Increase sales, increase “Revenue” to increase Net Profit %, but by how much?
- Click on “Data” tab
- Click “What-If Analysis”
- Click “Goal Seek”
Step 3: Fill in the Blanks
- Set Cell – What you want to change? (In this example, it’s cell I10.)
- To Value – Your goal, that you need 40% to IPO (.40)
- By Changing Cell – What needs to change? (Revenue)
- Click “OK”
Step 4: Evaluate Solutions
In order to have 40% Net Profit %, Revenue needs to be $190M instead of $182M.
Want More Insight?
We hope you find this Goal Seek tip useful in managing your finance, sales, and forecasting planning. You can sign up to receive notifications every time we post new insights, just by visiting our blog subscription page!
