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
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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