Goal Seek in Excel

Goal Seek is used to get a particular result when you're not too sure of the starting value. For example, if the answer is 56, and the first number is 8, what is the second number? Is it 8 multiplied by 7, or 8 multiplied by 6? You can use Goal Seek to find out. We'll try that example to get you started, and then have a go at a more practical example.

Create the following Excel spreadsheet

In the spreadsheet above, we know that we want to multiply the number in B1 by the number in B2. The number in cell B2 is the one we're not too sure of. The answer is going in cell B3. Our answer is wrong at the moment, because we has a Goal of 56. To use Goal Seek to get the answer, try the following:

From the Excel menu bar, click on Data Locate the Data Tools panel and the What if Analysis item. From the What if Analysis menu,

select Goal Seek The following dialogue box appears:

The first thing Excel is looking for is "Set cell". This is not very well named. It means "Which cell contains the Formula that you want Excel to use". For us, this is cell B3. We have the following formula in B3:

= B1 * B2

So enter B3 into the "Set cell" box, if it's not already in there.

The "To value" box means "What answer are you looking for"? For us, this is 56. So just type 56 into the "To value" box

The "By Changing Cell" is the part you're not sure of. Excel will be changing this part. For us, it was cell B2. We're weren't sure which number, when multiplied by 8, gave the answer 56. So type B2 into the box.

You Goal Seek dialogue box should look like ours below:

Click OK and Excel will tell you if it has found a solution:

Click OK again, because Excel has found the answer. Your new spreadsheet will look like this one:

As you can see, Excel has changed cell B2 and replace the 6 with a 7 - the correct answer.

We'll now try a more practical example.

Goal Seek Number Two

Consider this problem:

Your business has a modest profit of 25,000. You've set yourself a new profit Goal of 35,000. At the moment, you're selling 1000 items at 25 each. Assume that you'll still sell 1000 items. The question is, to hit your new profit of 35,000, by how much do you have to raise your prices?

Create the spreadsheet below, and we'll find a solution with Goal Seek.

The spreadsheet is split into two: Current Sales, and Future Sales. We'll be changing the Future Sales with Goal Seek. But for now, enter the same values for both sections. The formula to enter for B4 is this:

= B2 * B3

And the formula to enter for E4 is this:

= E2 * E3

The current Price Per Item is 25.00. We want to change this with Goal Seek, because our prices will be going up to hit our new profits of 35,000. So try this:

From the Excel menu bar, click on Data Locate the Data Tools panel and the What if Analysis item. From the What if Analysis menu,

select Goal Seek The following dialogue box appears:

For "Set cell", enter E4. This is where the formula is. The "To Value" is what we want our new profits to be. So enter 35000. The "By changing cell" is the part we're not sure of. For us, this was the price each item needs to be increased by. This was coming from cell E3 on our spreadsheet. So enter E3 in the "By changing cell" box. Your Goal Seek dialogue box should now look like this:

Click OK to see if Excel can find an answer:

Excel is now telling that it has indeed found a solution. Click OK to see the new version of the spreadsheet:

Our new Price Per Item is 35. Excel has also changed the Profits cell to 35 000.

 

Exercise

You've had a meeting with your staff, and it has been decide that a price change from 25 to 35 is not a good idea. A better idea is to sell more items. You still want a profit of 35 000. Use Goal Seek to find out how many items you'll have to sell to meet your new profit figure.

To use Goal Seek (Example 1):

Let's say you're enrolled in a class. You currently have a grade of 65, and you need at least a 70 to pass the class. Luckily, you have one final assignment that might be able to raise your average. You can use Goal Seek to find out what grade you need on the final assignment to pass the class.

In the image below, you can see that the grades on the first four assignments are 58, 70, 72, and 60. Even though we don't know what the fifth grade will be, we can go ahead and write a formula or function that calculates the final grade. In this case, each assignment is weighted equally, so all we have to do is average all five grades by typing =AVERAGE(B2:B6). Once we use Goal Seek, cell B6 will show us the minimum grade we'll need to make on the final assignment.

1. Select the cell containing the value you want to change. When you use Goal Seek, you'll need to select a cell that already contains a formula or function. In our example, we'll select cell B7 because it contains the formula =AVERAGE(B2:B6).

2. From the Data tab, click the What-If Analysis command, then select Goal Seek from the drop-down menu.

3. A dialog box will appear with three fields: o Set cell: This is the cell that will contain the desired result. In our example, cell B7 is

already selected.o To value: This is the desired result. In our example, we'll enter 70 because we need to

earn at least that to pass the class.o By changing cell: This is the cell where Goal Seek will place its answer. In our example,

we'll select cell B6 because we want to determine the grade we need to earn on the final assignment.

4. When you're done, click OK.

5. The dialog box will tell you if Goal Seek was able to find a solution. Click OK.

6. The result will appear in the specified cell. In our example, Goal Seek calculated that we will need to score at least a 90 on the final assignment to earn a passing grade.

o use Goal Seek (Example 2):

Let's say you need a loan to buy a new car. You already know you want a loan amount of $20,000, a 60-month term—the length of time it takes to pay off the loan—and a payment of no more than $400 per month. However, you're not sure yet what the interest rate will be.

In the image below, you can see that Interest Rate is left blank and Payment is $333.33. This is because the payment is being calculated by a specialized function called the PMT (Payment) function, and $333.33 is what the monthly payment would be if there were no interest ($20,000 divided by 60 monthly payments).

If we typed different values into the empty Interest Rate cell, we could eventually find the value that causes Payment to be $400, and that would be the highest interest rate that we could afford. However, Goal Seek can do this automatically by starting with the result and working backward.

To insert the PMT function:

1. Select the cell where you want the function to be.2. From the Formula tab, select the Financial command.

3. A drop-down menu will appear showing all financial-related functions. Scroll down and select the PMT function.

4. A dialog box will appear.5. Enter the desired values and/or cell references into the different fields. In this example, we're

only using Rate, Nper (the number of payments), and Pv (the loan amount).

6. Click OK. The result will appear in the selected cell. Note that this is not our final result because we still don't know what the interest rate will be.

To use Goal Seek to find the interest rate:

Now that we've added the PMT function, we can use Goal Seek to find the interest rate we'll need.

1. From the Data tab, click the What-If Analysis command.2. Select Goal Seek.

3. A dialog box will appear containing three fields: o Set cell: This is the cell that will contain the desired result (in this case, the monthly

payment). In this example, we will set it to B5 (it doesn't matter whether it's an absolute or relative reference).

o To value: This is the desired result. We'll set it to -400. Because we're making a payment that will be subtracted from our loan amount, we have to enter the payment as a negative number.

o By changing cell: This is the cell where Goal Seek will place its answer (in this case, the interest rate). We'll set it to B4.

4. When you're done, click OK. The dialog box will tell you whether Goal Seek was able to find a solution. In this example, the solution is 7.42%, and it has been placed in cell B4. This tells us that a 7.42% interest rate will give us a $400-per-month payment on a $20,000 loan that is paid off over five years, or 60 months.

How to Use the Goal Seek Feature in Excel 2013By Greg Harvey from Excel 2013 For Dummies

When you need to do analysis, you use Excel 2013’s Goal Seek feature to find the input values needed to achieve the desired goal. Sometimes when doing what-if analysis, you have a particular outcome in mind, such as a target sales amount or growth percentage.

To use the Goal Seek feature located on the What-If Analysis button’s drop-down menu, you need to select the cell containing the formula that will return the result you’re seeking (referred to as the set cell in the Goal Seek dialog box). Then indicate the target value you want the formula to return as well as the location of the input value that Excel can change to reach this target.

Below, you see how you can use the Goal Seek feature to find out how much sales must increase to realize first quarter net income of $225,000 (given certain growth, cost of goods sold, and expense assumptions) in a sales forecast table.

To find out how much sales must increase to return a net income of $225,000 in the first quarter, select cell B7, which contains the formula that calculates the forecast for the first quarter of 2014 before you click Data→What-If Analysis→Goal Seek on the Ribbon or press Alt+AWG.

This action opens the Goal Seek dialog box. Because cell B7 is the active cell when you open this dialog box, the Set Cell text box already contains the cell reference B7. You then click the To Value text box and enter 225000 as the goal. Then, click the By Changing Cell text box and click cell B3 the worksheet to enter the absolute cell address, $B$3.

You can see the Goal Seek Status dialog box that appears when you click OK in the Goal Seek dialog box to have Excel go ahead and adjust the sales figure to reach your desired income figure. Excel increases the sales in cell B3 from $250,000 to $432,692.31 which, in turn, returns $225,000 as the income in cell B7.

Step 1: Make an easy table, and fill items with given data in the table. See the following screen shot:

Step 2: Enter proper formulas to calculate revenue, variable cost, and profit.

Revenue = Unit Price x Unit Sold Variable Costs = Cost per Unit x Unit Sold Profit = Revenue – Variable Cost – Fixed Costs

Step 3: Click the Data >> What-If Analysis >> Goal Seek.

Step 4: In the Goal Seek dialog box,

Specify the Set Cell as the Profit cell, in our case it is Cell B7; Specify the To value as 0; Specify the By changing cell as the Unit Price cell, in our case it is Cell B1. Click OK.

Now it changes the Unit Price from 40 to 36, and calculates the net profit to 0.

Therefore, if you forecast the sales volume is 50, and the Unit price cannot be less than 36, otherwise loss occurs.

oal Seek to find out.

 

Create the following Excel spreadsheet

In the spreadsheet above, we are calculating savings based on family income and expense. Here, total expense is the summation of all expense items, My income is the summation of all income sources and My savings is the difference between My Income and Total Expense.

Now I want to save more for my future plan. Suppose, I want to save 70,000 tk for the above family budget. So, I need to expense less, that’s for sure. I want to reduce my miscellaneous expense and added the amount in my saving. The question is “How much I deduct from miscellaneous cost? By using goal seek, I can find out easily and magically.

 

To use Goal Seek to get the answer, try the following:

From the Excel menu bar, click on Data Tab. Locate the Data Tools panel and the What if Analysis item. From the What if Analysis menu, select Goal Seek

The following dialogue box appears:

The first thing Excel is looking for is “Set cell”. This is not very well named. It means “Which cell contains the Formula that you want Excel to use”. For us, this is cell E6. We have the following formula in E6:E6 = E5 – E4

Set Cell: So enter E6 into the “Set cell” box, if it’s not already in there.To Value: The “To value” box means “What answer are you looking for”? For us, this is 70,000. So just type 70000 into the “To value” boxBy changing cell: The “By Changing Cell” is the part you’re not sure of. Excel will be changing this part. For us, it was cell B12. So type B12 into the box or just select the cell.

You Goal Seek dialogue box should look like ours below:

Click OK and Excel will tell you if it has found a solution:

Click OK again, because Excel has found the answer. Your new spreadsheet will look like this one:

As you can see, Excel has changed cell E6 and replace 70,000 which I exactly looking for.

Example 1

Let's start by a simple example. Go to Excel > Open a Blank Worksheet > Input the data as shown below:

The red figures are negative values.

Input the figures in Sales for Product A, B and C.

Enter Cost of Goods Sold in the next row.

Deduct 3rd row from 2nd row to find out the Gross Profit. (i.e. =B2-B3)

Enter the other expenses in the 5th row.

Deduct expenses from Gross profit to find Net Profit. (i.e. =B4-B5)

Important: you must find out the Gross Profit, Net Profit through formula. Otherwise, the Goal Seek function may not work.

At the 6th row, we get the Net Profit for Product A, B and C as 250000, 180000 and 195000 respectively. 

Problems & Solutions

In this settings, how can we increase the Net Profit of Product C from 195000 to 200000?

Ans: You can either increase sales, or decrease COGS and other expenses. But you have only one choice. Choose any of the three variables what you are supposed to change. Suppose, you have to change COGS. That means, cell D3. Use Goal Seek as follows:

Select the D6 cell. Move to the DATA tab > What-If Analysis > Choose Goal Seek.

Make sure that the Set Cell box contains D6.

Type 200000 in To Value box.

Click on the By changing cell box and choose D3 from the worksheet. Then it will be automatically converted to $D$3.

Hit OK > You will get the following result - 

This example is easy to calculate. You can find the result through manual process. Now I would like to move to the more complex example.

Example 2

Go to Excel > Create a new worksheet. Input the data as shown below:

Input the price of finished goods in B1.

Per unit variable cost in B2.

Enter the total number of units produced in B3.

Get total variable cost by multiplying variable cost and total unit (=B3*B2).

Enter the fixed cost as given.

Multiply price with total number of units produced to find out Revenue (=B3*B1).

Deduct fixed cost and variable cost from revenue to determine profit (=B6-B5-B4).

In the above example, the profit is 3000. How to make it 5000?

Well, you may have several choice as:

Changing the price

Reducing the variable cost

Increasing the production unit etc.

Suppose, you have no way to reduce the cost or increase the production. In that situation, you can only adjust the price. Let's raise it through Goal Seek . . . 

Click on the cell B1 Move to Data > What-It Analysis > Goal Seek

Set Cell B1 To Value 5000 By Changing Cell, choose B1 ($B$1) Hit OK > Finally Get the following result - 

Within wasting much time, you can calculate the optimum product price to earn your target profit. You just raise the price by .40 to increase the profit from 3000 to 5000. Similarly, you can also adjust variable cost or production unit. But you can't work with more than  one variable at a time. 

Project File

I've uploaded the project file in Google Drive. You can download this if necessary. The project file is saved as .xlsx format. You must need at least Excel 2007 or above to open this file