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Bear/Base/Bull Scenario Decision Framework
A three-scenario analysis framework for evaluating major financial decisions by modeling outcomes under pessimistic (bear), realistic (base), and optimistic (bull) conditions
How It Works
Forces founders to consider downside risk, baseline expectations, and upside potential before making expensive decisions. Uses specific percentage changes (typically ±10% revenue) to model different business conditions and their impact on runway
Components
Define the decision and financial commitment required
Model bear case: revenue drops 10%, calculate runway impact
Model base case: current plan holds, assess best use of capital
Model bull case: revenue grows 10%, evaluate regret potential
Apply decision rule: proceed if 2+ scenarios show positive outcome
Set milestone-based execution to reduce risk
When to Use
For any major financial decision over $50K, key hires, significant marketing spend, office leases, or equipment purchases that could materially impact runway
When Not to Use
For small operational expenses under $10K, emergency situations requiring immediate action, or decisions with minimal financial impact
Anti-Patterns to Avoid
Example
“Company wants to hire $150K engineer. Bear case: runway drops from 14 to 9 months (dangerous). Base case: runway drops to 11 months. Bull case: unlocks $500K revenue, runway extends to 16 months. Decision: Wait until base case runway improves to 12+ months minimum.”