Risk
Monte Carlo Outcome Simulator
A single-point forecast tells you one story. This runs four thousand versions of the year — revenue and variable cost drawn independently around the averages you enter — and reports how often you hit the target, how often you lose money, and what a bad year and a good year actually look like.
Inputs
- Expected revenue
- Revenue standard deviation — Roughly two thirds of years land within one of these of the mean.
- Variable cost, expected
- Variable cost standard deviation
- Fixed costs
- Target profit
How to use this calculator
- Enter the revenue you expect, then a standard deviation for it. If you have a few years of history, the spread between your good and bad years is a better guide than a guess. If you have none, use something wide enough to be uncomfortable.
- Do the same for variable cost as a percentage of revenue: its average and how much it swings.
- Enter fixed costs and the profit you are trying to reach.
- The headline is how often the target is hit across four thousand simulated years. Read it next to the probability of a loss.
- Compare the single-point forecast row with the median. When they differ, the difference is telling you that the spread, not the average, is what you are actually managing.
- Change one standard deviation at a time and watch the P10 move. That is the fastest way to see which uncertainty is really driving your risk.
What each term means
- Monte Carlo simulation
- Running the same model thousands of times with randomly drawn inputs, then reading the distribution of results instead of a single answer.
- Standard deviation
- A measure of spread. Roughly two thirds of draws land within one standard deviation of the mean, and about 95% within two.
- P10 / P50 / P90
- The 10th, 50th, and 90th percentile results: a bad year, a middling year, and a good year out of the simulated set.
- Single-point forecast
- The answer you get by plugging in the averages and nothing else. It is one scenario, not the expected experience.
- Seeded pseudo-random
- Randomness generated by a formula starting from your inputs, so results are unpredictable-looking but perfectly repeatable.
- Tail risk
- The rare, severe outcomes at the far edge of the distribution, the ones a normal curve consistently underweights.
Educational disclaimer: Outputs are simplified educational estimates built from the numbers you enter — they are not financial, legal, tax, or investment advice, and real decisions deserve verified figures and qualified professionals.