Analyzing "What If" Scenarios Using Goal Seek in Excel

Have you ever wondered what type of impact a small tweak or modification to a product or service may have on its overall returns?

What if you can create a "What If" scenario to help you make better informed decisions and hit your target?

Look no further for a simple "What If" analysis that leverages the Goal Seek feature. Goal Seek is a useful tool especially when you have a formula that you want to use but unsure of the value that you need to get your desired results.

In the example below, we will be looking at a breakdown of a product cost and then determine what our profit margins will be based on a suggested retail price. I've provided a link to the walkthrough video here as well.

First we'll establish the "Margin Formula" in our identified cell.

(Retail Price - Cost Price) / Retail Price

With a cost price of $12.25 and a retail price of $15.00, our profit margin is calculated to be roughly 18% for Product 1. Now if we wanted to target a 25% Profit Margin instead of 18% we can use the "Goal Seek" feature to help us determine what the New retail price should be.

To do this, we'll need to go to the "Data" tab, select the "What-If Analysis" icon,

Then select "Goal Seek" from the Dropdown.

We're going to get "Goal Seek" Pop-up Window where we can then plug in our parameters.

We're going to key in .25 for the "To Value" field, since we want to target a 25% Profit Margin

Then select the Retail Price cell location of G6 as it's the cell we want to change for the "By changing cell" field, since that's the new value that we want to know how much we need to sell for to get the expected profit margin of 25%.

Once the fields have been filled out. Click "OK".

"Goal Seek" will then prompt the status of a found solution. Click "OK" again.

We can now see, the New Retail price is $16.33 to hit a target profit margin of 25%.

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