From Assumptions to Limits: How to Write Assumptions and Limitations in High‑Stakes IC Memos

Step 1 – Define and Differentiate with IC Context

In private equity Investment Committee (IC) memos, assumptions and limitations are not academic decorations. They are the operating system of decision quality. The committee approves or rejects deals based on whether the analysis is robust under defined conditions and whether the constraints are understood and tolerable. To write them effectively, start by clarifying the roles they play.

• Assumptions state what must be true for your analysis, projections, or recommendation to hold. They are the explicit conditions that support the logic of your model or thesis. If an assumption fails, your conclusion may change materially. Assumptions anchor the forecast, the thesis, and the sensitivity analysis.
• Limitations express what constrains the scope, precision, or confidence of your analysis—even if the assumptions prove true. They identify boundaries: data gaps, measurement error, model simplifications, timing constraints, or external uncertainties that cap certainty or coverage.

In high-stakes IC contexts, the difference matters because the committee needs to know both the trigger points that can flip a decision (assumptions) and the ceiling on confidence (limitations). When you state these explicitly, you let decision-makers judge risk–reward on the right terms: what must hold, what could break, and what cannot be known or captured within the current analysis.

A quick test helps you categorize correctly:

• Assumption test: If this statement proves false, would our recommendation change or require rework? If yes, it is an assumption.
• Limitation test: Even if this statement is true, does something still cap our certainty or scope? If yes, it is a limitation.

These definitions also align with how ICs consume information. They need conditions tied to the model and thesis, and they need clarity on the inherent blind spots or constraints. When assumptions are vague or buried, the IC cannot judge fragility. When limitations are hidden in boilerplate, the IC cannot gauge confidence. You are not protecting yourself by masking uncertainty; you are eroding decision quality. The goal is not to reduce risk to zero. It is to match risk understanding with capital at stake.

Finally, remember that assumptions are choices. You can calibrate them with ranges, confidence levels, and dated sources. Limitations are constraints. You can frame them with scope, severity, and potential mitigation pathways. Both must be decision-useful: clear, quantified, and placed near the relevant analysis so the reader sees cause and effect.

Step 2 – Specify Standards for Decision-Useful Writing

To make assumptions and limitations decision-useful, apply a micro-style guide that raises clarity and compresses cognitive load. IC readers scan quickly. They need consistent signals, precise language, and compact numerics. Follow these standards.

• Use action-oriented subheadings. Start each assumption or limitation with a verb or a result-oriented phrase that signals the content’s function. This helps scanning and aligns each item to a decision pivot.
• Write concise, single-purpose sentences. One assumption or limitation per sentence. Avoid multi-clause bundling. Readers should be able to quote and test each item independently.
• Quantify with ranges and dates. Replace generic labels (e.g., “strong growth,” “near-term”) with numeric ranges and time stamps. State the vintage of the data and the period the assumption covers.
• Link to sources. Cite the source close to the claim. If confidential, identify the class of source (company-reported, audited financials, third-party dataset) and the date. Source proximity supports verification.
• Tie to implications. Add a brief clause that connects the assumption or limitation to the specific part of the model or thesis it affects. This creates an immediate line of sight to decision impact.
• Prefer parallel structures. Use the same grammatical pattern for items in a series. Parallel structure accelerates scanning and reduces misinterpretation.
• Eliminate hedging adverbs. Words like “likely,” “somewhat,” “generally,” and “appears” dilute meaning. Replace them with quantified statements or confidence qualifiers (e.g., 70% confidence, 90% interval). If you cannot quantify, specify what evidence you have and what you lack.
• State confidence explicitly. Write a confidence level where appropriate, or reference the width of a range to signal uncertainty. Confidence forces discipline and aids IC discussion.
• Format numbers consistently. Use the same currency, units, and significant figures across the memo. Maintain consistent thousand separators, decimal places, and time bases (monthly vs. annual). Avoid gratuitous precision; match precision to data quality.
• Place near the relevant analysis. Do not bury key assumptions and limitations in an appendix. Place the few that drive decision risk immediately adjacent to the analysis they support. Reserve the full map for the appendix.

These standards turn text into decisions. The combination of action subheadings, numbers, sources, dates, and explicit implications converts abstract caveats into operational knowledge that the IC can debate and price.

Step 3 – Build the Assumption–Limitation Map for a Deal

Before drafting the memo, construct a structured map. This prewriting step surfaces gaps, aligns the team on what truly matters, and prevents last-minute patchwork.

Use two parallel tools.

• Assumption Map (3 columns):

  • Assumption: a single, testable, decision-relevant statement.
  • Evidence & Range: key data, source(s), date(s), and the numeric range or scenario band that supports it.
  • Dependency/Impact: the model components or recommendations that rely on this assumption, and the magnitude of effect when it shifts.

• Limitations Table (3 columns):

  • Limitation: a specific constraint on scope, measurement, timing, or inherent uncertainty.
  • Scope/Severity: the domain it affects and how much it caps confidence (e.g., narrow, moderate, high).
  • Mitigation: steps to reduce the limitation’s effect, validation tasks, or monitoring triggers.

The mapping exercise forces prioritization. It reveals which assumptions are foundational and which are secondary. It highlights where evidence is thin or stale. It distinguishes between unknowns (information gaps resolvable with effort) and unknowables (inherent volatility or structural ambiguity that persists even with more research). This distinction is crucial for the IC: unknowns invite a plan; unknowables require risk pricing or structural protection.

Once drafted, prune the map into two layers for the memo:

• Memo body: Include only the assumptions that drive the investment case and those that anchor key risks or sensitivities, plus the limitations that materially cap confidence on the core thesis. Keep each item tight, quantified, and placed near the relevant charts or analysis.
• Appendix: Include the full map, along with extended notes on evidence, alternate scenarios, and mitigation plans. Cross-reference clearly from the body to the appendix for details.

By doing this, you create a navigable structure. An IC member can see, on one page, the levers that matter and the boundaries of certainty, and then dive deeper if needed.

Step 4 – Edit for Precision and Integration

Drafting is only half the job. The editing phase turns acceptable text into decision-grade language. Use a disciplined checklist that targets precision, numerical rigor, and structural integration.

• Remove hedges; add ranges. Scan for adverbs and vague qualifiers. Replace them with numeric ranges, confidence intervals, or explicit evidence. If a claim is directional without quant support, state the qualitative evidence and note the plan to quantify.
• Tighten numerics. Ensure units are consistent. Right-size precision to data quality: do not forecast to one decimal place if the underlying range is wide. Align time frames across assumptions and model periods.
• Date-stamp evidence. Add data vintages and collection dates wherever you cite facts. IC decisions often hinge on recency. Mark any evidence older than the decision’s relevance horizon.
• Cross-reference impacts. After each assumption or limitation, insert a parenthetical cue to the exact model tab, chart, or section it influences. This makes your memo self-navigating.
• Use action subheadings. Convert neutral labels into verbs or result-oriented phrases. Each subheading should help a skimming reader grasp the thrust and location of decision leverage.
• Clarify unknowns vs. unknowables. For unknowns, add a mitigation or validation step with owner and timeline. For unknowables, state how risk is priced or bounded (structure, covenants, hedges) and how it will be monitored.
• Prune to significance. Remove minor assumptions or limitations that do not move the decision. Keep the surface area small in the body; preserve completeness in the appendix.
• Align with risks and recommendations. For every major risk or recommendation, explicitly tie it to the assumptions it depends on and to the limitations that cap certainty. This integration prevents contradictions and surprises in the IC discussion.
• Standardize number and verb style. Use consistent tense (typically present for statements of evidence, future or modal for projections), and standard number formats across the memo. Consistency reduces misreadings.
• Place where the reader needs it. Position assumptions at the top or left of the analysis they enable; place limitations immediately below or beside the relevant chart, not detached on another page. Proximity strengthens comprehension and accountability.

Integration is as important as precision. When assumptions and limitations are woven into the structure of the analysis, the IC can debate substance rather than chase definitions. Cross-references keep conversation focused; aligned formatting keeps cognition on the content, not on deciphering style.

Why this method works for non-native executives

Executives reading in a second language benefit from rules that compress ambiguity. Action headings and parallel structures reduce syntactic complexity. Quantification replaces vague modifiers with shared metrics. Source links and date stamps allow independent verification without long prose. The assumption–limitation map transforms an amorphous set of caveats into a structured, scannable dataset. Editing checklists create repeatable quality under time pressure. Together, these elements lower cognitive load while raising decision clarity.

Crucially, the method operationalizes the broader writing principles you already use in IC memos—precise verbs, numerical rigor, and tight structure—but applies them to the specific domain of assumptions and limitations. That domain is where many memos fail: either by over-relying on boilerplate or by under-specifying what drives the recommendation. With this four-step sequence, you move from conceptual clarity to concrete standards, then to a mapping tool that captures complexity, and finally to editing practices that integrate everything into the memo body.

When done well, your IC memo tells a disciplined story: these are the conditions that must hold, here is the evidence and range, these are the constraints on our certainty, and here is exactly how each item affects the thesis and what we will do about it. You have not eliminated uncertainty. You have made it legible, measurable, and actionable.