For teams
Finance needs the assumptions under the model
Finance teams see every proposal as a model, and every model as a stack of assumptions with a total at the bottom. The work is finding which assumption the total depends on and asking how anyone knows it. Pricing changes, capital requests, and large contracts all reward that habit.
Argumont is not financial, tax, or investment advice.
Contribution, not revenue
A price rise is judged by how many customers it can lose before the business is worse off. Testing that against revenue understates your room, because each customer who leaves also takes their variable cost away.
Contribution margin, the price minus the variable cost of serving a customer, is the honest base for the sum.
Payback, value, and the hurdle
Payback period is easy to explain and blind to everything after the payback date. Net present value counts every year but leans on a discount rate that is itself a choice. Use both, and set the hurdle rate before the proposal arrives, so it cannot be tuned to the project.
Where a model hides its guesses
Watch the inputs typed by the person who benefits: the sales forecast in the sales case, the savings in the vendor's business case. They are unverified by default rather than wrong by default.
A model that marks which cells came from the ledger and which came from a hope is more useful than one with more tabs.
A financial bet in a Decision Room
Each option gets its own Champion, including leaving the price where it is. The Challenger presses on the churn assumption, because the case stands or falls on it. The room works the break-even sums exactly from your figures, so the debate is about inputs, not arithmetic. Gray Wolf looks for what the model leaves out: discounts sales will grant, contracts with price protection, and customers who leave a quarter later.
The Verdict says what it rests on and what remains uncertain. Its confidence describes the strength of that record, not a probability.
A 10 percent price rise
A product has 2,000 customers paying $50 a month, and each costs $15 a month to serve. Revenue is $100,000 a month and contribution is $70,000. Raise the price to $55 and contribution per customer rises to $40. Judged on revenue, the business can lose 181 customers, about 9 percent, before it is worse off. Judged on contribution, it can lose 250, or 12.5 percent. The Challenger then asks how many customers hold contracts that block the rise; if 400 are locked for a year, only 1,600 pay the new price in year one, and the room reworks the sums. The Verdict favors the rise for new and renewing customers, and names the level at which it would reverse: churn above 10 percent in the first quarter.
Questions
- Can the room work from our existing model?
- Bring the figures that matter: prices, costs, volumes, and the assumptions behind them. The sums are worked from those, and each assumption is marked by what supports it.
- Who signs off?
- The finance lead or the committee with authority. The Human Decision and any approvals are kept in the Decision Passport, separate from the Verdict.
Further reading
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