What is goal-seeking?
When the output is known, goal searching finds the proper input value. Goal-seeking functions are available in several software packages, such as Microsoft Excel.
Learn Goal-seeking
Goal-seeking is the process of determining your input value from your output value. Computer software calculates a formula operator.
Computer software “what-if analysis” uses goal-setting. The “what-if” analysis in Microsoft Excel involves altering cell values to determine the impact on formula results on the worksheet. Goal-seeking involves a what-if analysis of an output or value. So, you would question, “What if the output was X?” to create a cause-and-effect scenario.
People utilize the software for complicated tasks. Microsoft Excel has a goal-setting feature. It lets the user choose a formula input while the output is known. Using this tool, users may assess the interest rate a borrower qualifies for based on their monthly budget.
A goal-seeking program requires one input value. Trying to calculate two or more input values won’t work. Goal-seeking software won’t calculate the loan amount and monthly payment in the given scenario. Calculating many variables may need an add-on.
How Excel Goal Seeking Works
Goal-seeking software only works if you know the output value but wish to identify one input value. To use the program’s goal-seek function, complete these steps:
- Start a spreadsheet.
- Label columns. This makes reading the worksheet simpler. For the example above, the first column should be “Loan Amount,” the second “Term in Months,” the third “Interest Rate,” and the last “Payment.”
- Enter known values.
- Enter the formula to compute the goal—payment. The calculation assumes a 0% interest rate; therefore, ignore it.
Now, choose an interest rate. Excel’s Goal Seek function lets you enter existing data.
Example
Using goal-seeking, entrepreneurs identify how to achieve their ultimate aims. Entrepreneurs may wonder how much they must earn each hour to make $100,000. They know they want $100,000 in output, so they must work back to find the best input. So they must decide how many hours they can (or will) work in a year and how much they will earn each hour to attain their objective.
Conclusion
- With only the output known, goal-seeking is finding the correct input.
- Using Microsoft Excel’s goal-seeking tool or computer applications’ what-if analysis is expected.
- However, goal-seek software only works with one input value.