Discover why Sarah needs Goal Seek to find her target price.
"Sarah, our investor meeting is in two days," Alex said. "They want to know: what's the lowest price we can charge and still make $15,000 profit?"
Sarah stared at her CVP worksheet. She knew her fixed costs were $12,000 and her variable cost per project was $880. At her current price of $1,350, she needed about 57 projects just to break even. But the investor wanted to know: what price for what volume to hit that $15,000 target?
"I could try dozens of prices manually," Sarah told Jennifer. "But there's got to be a faster way. I need Excel to work backward from my target."
From Forward Math to Reverse Engineering
In Lessons 3 and 4, you calculated profit forward: enter price and volume, see profit come out. That's like driving forward while looking in the rearview mirror.
In this lesson, we use Goal Seek to drive backward: tell Excel the profit you want, and it finds the price or volume you need. This is exactly what investors and CEOs need to hear.
1. Sarah wants to earn $15,000 in profit next month. If she keeps her current price of $1,350 per project, how many projects does she need to sell?
2. Instead of guessing different volumes, what if Sarah could tell Excel: 'Find the price that gives me $15,000 profit at 25 projects'—what tool would she use?
Discussion Prompt (3 minutes):
Share with a partner:
- Why would an investor ask "what's the lowest price" instead of "what's our profit"?
- If Sarah knows her target profit and her volume, what's the one thing she doesn't know?
- How would knowing the answer help Sarah prepare for the investor meeting?