How to use this checklist: Run this stress test quarterly — or immediately after any material change to the business (a large customer loss, a fundraising delay, or a cost spike). The goal is not to predict exactly what will happen, but to verify that you have modelled the plausible downside scenarios and have pre-agreed responses before any crisis forces your hand.
Warning: Stress tests are only useful if the numbers are honest. Conservative assumptions in the base case that prevent the downside scenario from looking truly adverse are a common failure mode. The downside scenario should feel uncomfortable — if it does not, it is not a stress test.
1. Revenue Shock Scenarios
- Model the impact of losing your top 3 customers simultaneouslyIdentify your top 3 customers by ARR. Remove their revenue from the model and recalculate runway, burn, and the new cash-out date. What is the new minimum viable headcount at this revenue level?
- Calculate runway if new sales stop completely for 3, 6, and 9 monthsA new logo sales freeze is a realistic scenario — economic downturn, regulatory delay, product issue. Run all three time horizons. At which point does the board need to act? At which point is it too late?
- Stress-test for a 30% MRR decline — what triggers it, when does cash run outA 30% MRR decline is a plausible scenario that has materialised for multiple fintech companies in market downturns. Model the causes (price compression, increased churn, failed expansion) and calculate the runway impact month by month.
- Model payment collection delays: DSO increases from 30 to 60 to 90 daysFor B2B fintech, Days Sales Outstanding creeping from 30 to 90 days effectively destroys months of working capital. Quantify the cash flow impact at each DSO level and identify which customers are most likely to slow-pay under stress.
- Churn spike: model a doubling of monthly churn for 6 monthsIf monthly gross churn doubles from, say, 1.5% to 3%, what is the cumulative ARR loss after 6 months? At what point does the churn level make the current cost base unsustainable without additional funding?
- Revenue recognition delay: what if 20% of contracted revenue slips a quarterImplementation delays, integration issues, or regulatory requirements can delay when contracted revenue can be recognised. Model a 20% revenue recognition slip and its impact on the P&L, deferred revenue balance, and cash position.
- Calculate the revenue level at which you reach default alive (zero burn)The revenue level at which net burn equals zero — the point at which the company no longer needs external capital to survive. How far is the current run rate from this level? How long would it take to reach it at current growth rates?
2. Cost Escalation Scenarios
- Headcount emergency: cost of an unplanned restructuringModel the full cost of reducing headcount by 20% at short notice: statutory redundancy, notice pay, potential settlement agreements, legal fees, and the productivity loss during the transition period. This is the cost of waiting too long to act.
- Regulatory fine or remediation: model a £250k–£1m unexpected compliance costFCA fines, required system remediation, mandatory third-party audits, and customer redress programmes have all materialised for fintech firms. Model the cash impact of a compliance event at three severity levels. Does the firm have liquidity to absorb it?
- Technology failure: cloud outage or security breach response costsA serious security incident or extended cloud outage can cost far more than the downtime itself — forensics, remediation, customer notification, potential ICO fines, and reputational damage affecting renewal rates. Quantify the realistic cost range.
- FX shock: 15% adverse move in primary trading currencies for 6 monthsIf the business has material revenue or costs in non-GBP currencies, a sustained 15% adverse FX move can materially alter the P&L and cash position. Model the impact on revenue (if USD or EUR denominated), costs, and working capital.
- Scheme or processor price increase: model a 25 basis point payment processing cost increasePayment scheme fee increases and processor repricing are a regular feature of the payments landscape. A 25bp increase in processing costs can have a significant EBITDA impact for high-volume payments businesses. Quantify the annualised cost at current volumes.
3. Funding & Liquidity Scenarios
- Next fundraise takes 6 months longer than planned — new cash-out dateThe most common scenario that kills companies is not a failed fundraise — it is a successful fundraise that takes longer than planned. If the next round takes 6 additional months to close, what is the new cash-out date? Is there still enough runway to reach term sheet?
- Bridge financing: is a short-term facility available, and on what termsIf the primary fundraise takes longer than planned, is there a bridge available? Identify potential bridge sources (existing investors, venture debt providers, revenue-based financing) and the realistic terms, including the dilution or cost of a bridge at each stage.
- Venture debt covenant breach: what happens and what are the remediation stepsIf venture debt is in place, review the financial covenants (minimum cash, minimum ARR, maximum burn multiple) and map them against the downside scenario. At what point do they breach? What are the cure rights and what are the lender's remedies?
- Bank failure or account freeze: operational continuity and backup planThe SVB collapse demonstrated that banking counterparty risk is real. Identify all banking relationships and the concentration of cash in each. Is there a backup account at a second institution? How long can the business operate if the primary account is frozen?
- Investor follow-on reluctance: what if existing investors do not participate in the next roundExisting investors are not always able or willing to follow on. Model the round without their participation — can it still be raised at an acceptable valuation and size? If not, how much does the round structure change and what does that do to the cap table?
4. Controls & Mitigants Verification
- Minimum cash floor defined: the non-negotiable minimum buffer before actionA defined, board-agreed minimum cash balance below which the company will not operate without triggering an emergency response. This is not the current cash balance — it is the floor at which actions must be taken regardless of fundraising confidence.
- Board-approved trigger points: at what runway level does the board convene an emergency sessionPre-agreed runway thresholds that trigger specific board actions: 12 months triggers a fundraising decision; 9 months triggers a cost review; 6 months triggers emergency protocols. Document these thresholds so they cannot be renegotiated when you need to act.
- Cost reduction waterfall documented: which costs can be cut, in what order, in under 30 daysA prioritised list of cost reduction actions that can be executed within 30 days if needed: contractor headcount, discretionary marketing spend, office costs, non-essential software, and deferred hiring. Quantify the monthly saving from each lever.
- Emergency facilities: overdraft, revolving credit facility, or shareholder loan availability confirmedIdentify and, where possible, pre-arrange emergency liquidity facilities. An overdraft facility that has not been drawn is far easier to negotiate from a position of strength than in a cash crisis. Confirm terms and drawdown conditions.
- Monthly liquidity report in place: CFO sign-off on 13-week cash forecast every month-endA 13-week rolling cash flow forecast, updated monthly, reviewed and signed off by the CFO, and presented to the board. This is the single most important control for managing liquidity in a pre-profitable business — and the one most commonly absent.
