Goal Seek in Excel

Goal Seek is a powerful tool in Excel that helps you find the input value required to achieve a specific goal or result in a formula. This tutorial explains how to use Goal Seek with real-time examples to help you perform data analysis effectively.

Step-by-Step Tutorial

Step 1: Set Up Your Data

  1. Open Excel and enter the data you want to analyze. Goal Seek is typically used with a formula, so ensure you have a formula set up in one of the cells.
  2. For example, let’s say you want to calculate the interest rate needed for a loan to reach a specific monthly payment. Your formula could look like this: 
    Monthly Payment = Loan Amount * Interest Rate

Step 2: Activate Goal Seek

  1. Click on the "Data" tab in the ribbon.
  2. Under the "Forecast" group, click on "What-If Analysis" and select "Goal Seek..." from the dropdown menu.

Step 3: Set the Goal Seek Parameters

  1. In the Goal Seek dialog box, you need to specify three things:
    • Set cell: This is the cell that contains the formula whose result you want to change. For example, this could be the cell containing the "Monthly Payment" formula.
    • To value: This is the goal or target value you want to achieve. For example, you could set the target monthly payment to $500.
    • By changing cell: This is the cell where the input value will be changed to achieve the target. For example, this could be the cell containing the interest rate.
  2. Once you have entered the parameters, click "OK" to run Goal Seek.

Step 4: Review the Results

  1. Excel will adjust the value in the "By changing cell" (interest rate) to achieve the target result in the "Set cell" (monthly payment).
  2. Excel will show you the new value that needs to be inputted to reach the desired result. For example, it may tell you that the interest rate should be 5.5% to get a $500 monthly payment.
  3. If you are satisfied with the result, click "OK" to apply the changes. If you want to discard the result, click "Cancel."

Real-Time Examples

Example 1: Loan Payment Calculation

Scenario: You want to determine the interest rate needed to achieve a specific monthly payment on a loan.

  1. Enter the loan amount in one cell (e.g., A1: $10,000).
  2. Enter the interest rate in another cell (e.g., B1: 4%).
  3. In a third cell, enter the formula to calculate the monthly payment, such as: 
    =A1*B1
  4. Use Goal Seek to change the interest rate in cell B1 to make the monthly payment equal to $500.
  5. In the Goal Seek dialog box, set "Set cell" to the cell with the formula (e.g., C1), "To value" to 500, and "By changing cell" to B1.
  6. Click "OK," and Excel will calculate the interest rate needed to achieve a $500 monthly payment.

Example 2: Sales Target Achievement

Scenario: You want to find out how much sales need to increase to meet a target revenue.

  1. Enter the current sales revenue in one cell (e.g., A1: $10,000).
  2. Enter the sales growth percentage in another cell (e.g., B1: 10%).
  3. In a third cell, enter the formula to calculate the target revenue, such as: 
    =A1*(1+B1)
  4. Use Goal Seek to change the sales growth percentage in cell B1 to make the target revenue equal to $15,000.
  5. In the Goal Seek dialog box, set "Set cell" to the target revenue cell, "To value" to 15000, and "By changing cell" to B1.
  6. Click "OK," and Excel will calculate the required sales growth percentage to reach the target revenue.

Example 3: Break-Even Analysis

Scenario: You want to calculate the price per unit needed to break even.

  1. Enter the fixed costs in one cell (e.g., A1: $10,000).
  2. Enter the variable cost per unit in another cell (e.g., B1: $5).
  3. Enter the number of units to be sold in a third cell (e.g., C1: 2,000 units).
  4. In a fourth cell, enter the formula to calculate the total revenue: 
    =C1*D1
  5. Use Goal Seek to determine the price per unit (D1) needed to cover the total costs of $10,000 (fixed costs) and $5 per unit (variable costs).
  6. In the Goal Seek dialog box, set "Set cell" to the total revenue cell, "To value" to 20000, and "By changing cell" to D1.
  7. Click "OK," and Excel will calculate the required price per unit to reach the break-even point.

Tips for Using Goal Seek

  • Goal Seek is best suited for simple problems with one input variable affecting the result.
  • If you have multiple variables to change, consider using Excel's Solver add-in for more complex analysis.
  • Always check the results and ensure they are realistic before applying the changes.
  • Goal Seek can be used for a variety of financial, marketing, and operations-related calculations.

Conclusion

Goal Seek is a valuable tool for data analysis in Excel. It allows you to quickly determine the required input value to achieve a desired result, making it ideal for financial modeling, target setting, and other business applications. Use the steps and examples provided to enhance your data analysis skills and make more informed decisions.




Advertisement