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.
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