How long would my business survive if sales dropped 30 percent?

On the worked example, 7.3 months. Revenue falls from $154,000.00 to $107,800.00 a month, and at a 40% gross margin that leaves $43,120.00 of contribution against $48,000.00 of fixed costs and $8,200.00 of debt repayments. The business burns $13,080.00 a month and $95,000.00 of cash lasts 7.3 months. That is the single most useful number on this page, because a 30 percent fall is the scale of downturn most businesses eventually meet.

What is my revenue floor?

The revenue below which the business loses money every month. On the worked example it is $140,500.00 a month, calculated as fixed costs of $48,000.00 plus debt repayments of $8,200.00, divided by the 40% gross margin. Against normal revenue of $154,000.00, that is a drop tolerance of only 8.77%. A business that starts losing money after a nine percent fall in sales has very little room, even though it looks comfortably profitable today.

Why does a small fall in sales cause such a large fall in profit?

Because fixed costs do not move. On the worked example a 10% fall in revenue is $15,400.00, but only $9,240.00 of costs disappear with it, so $6,160.00 comes straight off the bottom line. The business goes from making $5,400.00 a month to losing $760.00. This is operating leverage: the higher your fixed costs relative to your margin, the more violently profit responds to a change in sales, in both directions.

How much cash should a business hold to survive a downturn?

Enough to fund the burn at a realistic downturn for as long as it plausibly lasts. On the worked example, surviving twelve months at a 30% fall requires $156,960.00 of cash, and the business holds $95,000.00, so it is $61,960.00 short. Whether twelve months is the right target depends on the industry: a business with long contracts and slow-moving demand needs more than one that can rebuild a pipeline in a quarter.

Does cutting costs save a business in a downturn?

It helps, and it helps less than owners expect because of timing. On the worked example, cutting 25% of fixed costs saves $12,000.00 a month and pulls the revenue floor from $140,500.00 down to $110,500.00, which converts a 30% fall from fatal into survivable. But the cuts take two months to take effect, so the business burns cash at the full rate first. Cuts decided in month one and effective in month three are worth far more than the same cuts decided in month four.

Should I include loan repayments in a business stress test?

Yes, and separately from operating costs, because they behave differently. Rent can be renegotiated, staff hours can be reduced, marketing can be paused. A term loan repayment continues at the contracted amount regardless of trading, and missing one has consequences that a late supplier payment does not. On the worked example $8,200.00 a month of repayments accounts for 14.6% of the revenue floor, which is a material part of why the drop tolerance is so thin.

What is the difference between a stress test and a cash flow forecast?

A forecast asks what you expect to happen. A stress test asks what happens if you are wrong, and by design ignores your expectations. That is why it uses blunt percentage falls rather than a modelled scenario: the point is not to predict the downturn but to find out how much of one the business can absorb before the answer stops being survivable. Run both, and act on whichever gives the worse answer.

How often should a business run a stress test?

At least annually, and again whenever anything structural changes: taking on debt, signing a lease, hiring, or losing a customer worth more than about ten percent of revenue. Each of those moves the revenue floor, usually upward. The test takes a few minutes and the useful output is a single sentence you should be able to say without checking, namely how many months you would last if a third of your revenue disappeared.

Business Stress Test Calculator NZ 2026/27

Quick answer: On the worked example below, a business turning over $154,000.00 a month at a 40% gross margin makes $5,400.00 a month today. Its revenue floor is $140,500.00, so it starts losing money after only an 8.77% fall in sales. A 20% fall gives it 13.7 months of cash, a 30% fall gives it 7.3 months, and a 50% fall gives it 3.7. Surviving twelve months at a 30% fall would need $156,960.00, against $95,000.00 held.

A stress test does not ask what you expect to happen. It asks what happens if you are wrong, which is a different and considerably more useful question. This page takes a normal trading month and applies blunt falls in revenue of ten, twenty, thirty and fifty percent, then reports what each one does to the monthly cash position and how long the cash you hold would last. It deliberately separates the costs that fall away with the work, captured in the gross margin, from the fixed costs that continue regardless, and it treats debt repayments separately again because they are the least negotiable line in any downturn. Two outputs matter more than the rest. The revenue floor is the monthly figure below which the business loses money, and the drop tolerance expresses that as a percentage, which is usually a much smaller number than owners expect: a comfortably profitable business can often absorb less than a ten percent fall before it starts consuming cash. The page also models cost cutting with a realistic lead time, because cuts that take three months to take effect are worth very little to a business with two months of cash, and that timing distinction is where most downturn planning goes wrong.

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Updated Current 2026/27 rules applied.

Be careful counting an overdraft as available cash. An undrawn facility is only cash you hold if the bank leaves it in place, and facilities are commonly reviewed, reduced or withdrawn precisely when trading deteriorates. The same caution applies to invoice finance limits tied to debtor quality. If you want a genuinely conservative answer, run this page on your bank balance alone, then run it again including the facility, and treat the gap between the two as a risk rather than as a plan.

Verification & Methodology

Contribution = revenue × gross margin. Variable costs are the complement of the margin and fall proportionally with revenue.
Monthly cash position = contribution − fixed costs − debt repayments. Fixed costs and repayments do not move with revenue, which is the entire mechanism the test measures.
Survival months = cash held / monthly burn, where the burn is the negative cash position. A positive position survives indefinitely on these assumptions and is shown as such rather than as a large number.
Revenue floor = (fixed costs + debt repayments) / gross margin. This is the monthly revenue at which the cash position is exactly zero.
Drop tolerance = (current revenue − revenue floor) / current revenue.
Cash to survive twelve months = (monthly burn × 12) − cash held, at the fall you select. Shown as zero where no injection is needed.
Cost cutting reduces fixed costs by the percentage you enter, taking effect after the lead time in months. Before that point the business burns at the full rate, which is why the lead time changes the answer as much as the size of the cut.
Simplifying assumptions: the fall is immediate and sustained, the gross margin holds, debtors and creditors do not shift, and no tax refunds or asset sales arrive. Real downturns are messier, generally in the direction of being worse.
Not financial advice. Last verified: .

A normal trading month Monthly revenue

A typical month, not your best one. Gross margin

What is left after materials, subcontractors and other costs that fall away with the work.

Costs that do not move Fixed monthly costs

Rent, salaries, insurance, software, power, accounting. Monthly debt repayments

Kept separate because these cannot be cut.

Cash and defences Cash on hand

Fixed costs you could cut

Time for cuts to take effect

months

Notice periods, contract terms and lease exits all take time. Scenario for the cash figures

7.3

months at a 30% fall

Today

$5,400.00

monthly cash position

Revenue floor

$140,500.00

a month to break even

Drop tolerance

8.77%

before losing money

Cash gap

$61,960.00

to last 12 months

What each level of fall does

Sales fall	Revenue	Contribution	Monthly cash	Survives
None (today)	$154,000.00	$61,600.00	$5,400.00	indefinitely
10% fall	$138,600.00	$55,440.00	-$760.00	125.0 months
20% fall	$123,200.00	$49,280.00	-$6,920.00	13.7 months
30% fall	$107,800.00	$43,120.00	-$13,080.00	7.3 months
50% fall	$77,000.00	$30,800.00	-$25,400.00	3.7 months

Contribution is revenue times gross margin. Fixed costs of $48,000.00 and debt repayments of $8,200.00 continue unchanged in every row, which is exactly why the cash position falls so much faster than revenue does.

Your revenue floor

Fixed monthly costs	$48,000.00
Plus monthly debt repayments	$8,200.00
Divided by the 40% gross margin	$56,200.00
Revenue floor	$140,500.00
Current monthly revenue	$154,000.00
Headroom before losses start	$13,500.00
Drop tolerance	8.77%

What cutting 25% of fixed costs buys

Monthly saving from cutting 25% of fixed costs	$12,000.00
Revenue floor after the cuts	$110,500.00
Drop tolerance after the cuts	28.25%
Cash burnt before the cuts take effect (2 months)	$26,160.00
Survival at a 30% fall, with cuts	65.7 months

The cuts more than double the drop tolerance, but only after the lead time. Deciding early is worth more than cutting deeply.

Your Drop Tolerance Is Smaller Than You Think

The worked example describes a business making $5,400.00 a month. Comfortable, not spectacular, and entirely normal.

Its revenue floor is $140,500.00 against actual revenue of $154,000.00. That is a headroom of $13,500.00, or a drop tolerance of 8.77%. Losing one customer worth a tenth of revenue takes this business from profitable to loss-making. Not to danger, not to a difficult year, to losing money every single month.

That gap between how a business feels and how much shock it can absorb is the reason this page exists.

Worked Example: Where The 7.3 Months Comes From

Revenue of $154,000.00 at a 40% gross margin produces $61,600.00 of contribution. Fixed costs take $48,000.00 and debt repayments take $8,200.00, leaving $5,400.00.

Now drop sales 30%. Revenue falls to $107,800.00 and contribution to $43,120.00. Fixed costs and repayments have not moved at all, so the business now loses $13,080.00 a month. Against $95,000.00 of cash, that is 7.3 months.

Note the asymmetry. Revenue fell 30% and the monthly result moved by $18,480.00, from making $5,400.00 to losing $13,080.00. That is operating leverage, and it works just as violently on the way back up.

The 10% Row Is The Warning

A 10% fall costs $15,400.00 of revenue but only removes $9,240.00 of variable cost, so $6,160.00 comes straight off the result. The business tips from making $5,400.00 to losing $760.00.

At that rate the cash lasts 125 months, so nothing appears urgent. That is precisely what makes it dangerous: a business quietly losing $760.00 a month has years before the bank balance forces a conversation, and by the time it does the losses have usually deepened. The 10% row is not a survival problem, it is a detection problem.

Cutting Costs Works, But Timing Decides How Much

Cutting 25% of fixed costs saves $12,000.00 a month and drops the revenue floor from $140,500.00 to $110,500.00. Drop tolerance rises from 8.77% to 28.25%, which converts a 30% fall from a seven month problem into a survivable one.

The catch is the two month lead time. Notice periods, lease terms and contract exits mean the business burns $26,160.00 at the full rate before any saving arrives. Cuts decided in month one and effective in month three preserve most of the cash. The same cuts decided in month four, after the owner has spent three months hoping trade recovers, arrive with far less left to protect.

This is the practical lesson of the page: in a downturn the expensive decision is not cutting too deeply, it is deciding too late. Our Cost Cutting Impact Calculator ranks specific cuts by cash saved, speed and damage to revenue capacity.

Debt Repayments Are The Rigid Line

The $8,200.00 of monthly repayments is 14.6% of the revenue floor. Rent can be renegotiated, hours reduced, marketing paused, and most suppliers will discuss terms. A term loan does none of that: the amount is contracted and missing it has consequences a late supplier payment does not.

That is why debt is entered separately here. If the drop tolerance on this page is uncomfortably thin, restructuring debt is one of the few levers that moves the floor without damaging the business's ability to trade. Our Business Debt Restructure Calculator shows what that buys and what it costs.

What To Do With The Answer

Three actions follow from a thin result, in order of how quickly they work.

Build the buffer, using our Business Cash Buffer Calculator to set a target rather than guessing. Lower the floor, by reducing fixed costs or restructuring debt before you need to. And widen the margin, which is the slowest lever but the only one that improves both the floor and the profit at the same time: our Minimum Price Calculator and Margin of Safety Calculator cover it.

Then write the number down. Every owner should be able to answer, without checking, how many months the business would last if a third of its revenue disappeared.

Related NZ Business Resilience Calculators

Margin of Safety Calculator: the same drop tolerance measured against break-even.
Cash Runway Calculator: months of cash at your current burn.
Business Cash Buffer Calculator: how large a reserve this business should hold.
Cost Cutting Impact Calculator: which cuts to make, and in what order.
Business Health Check Calculator: the full ratio picture behind these numbers.

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Business Surplus Cash Calculator NZ 2026/27: where should a company hold surplus cash? Compare accounts, term depos.
Business Valuation Calculator: Earnings Multiple.
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Buy vs Hire Tools Calculator NZ 2026: break-Even on Equipment.

How to stress test a business against a fall in sales

Take a normal month, not your best one. Enter typical monthly revenue. Using a peak month makes every result on this page optimistic, which defeats the purpose of a stress test.
Separate variable costs from fixed costs. Gross margin captures the costs that fall away with the work: materials, subcontractors, freight. Fixed costs are what you pay regardless: rent, salaries, insurance, software, power.
Add debt repayments separately. Loan and finance repayments are not operating costs and cannot be cut, which is exactly why they matter so much in a downturn. They are the least flexible line on the page.
Enter the cash you actually hold. Bank balance plus any undrawn facility you are certain of. Be careful with overdrafts: a facility can be reviewed or withdrawn at precisely the moment you need it.
Read the survival months. For each level of sales fall, the calculator shows the monthly cash burn and how many months the cash lasts. The 30 percent row is the one most businesses should be able to answer.
Check what cutting costs actually buys. Model the proportion of fixed costs you could realistically cut and how long it would take. Cuts that take three months to take effect do not help a business with two months of cash.