Framework
Mental Models

Margin of Safety

Build buffer for what you can't predict

Best for
making robust commitments
Time
30–60 min
Difficulty
Intermediate

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Margin of Safety diagramSchematic of the Margin of Safety framework: Build buffer for what you can't predict.Estimated valueMargin of safetyPay only this much
The Margin of Safety diagram — Build buffer for what you can't predict.
Example

Setting a fundraising runway target that survives bad luck

Buffers built in
  1. Plan target — 18 months runway at current burn
  2. Add 25% buffer — 22 months under planned burn
  3. Stress test — what if revenue is 50% of plan? Still > 16 months
  4. Hire pace — only fire 80% of approved hiring plan in H1
  5. Trigger — at 12 months runway, revisit cost base

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