Revenue Projections

To generate Revenue projections or a Revenue forecast, you must incorporate:

• Revenue from existing customers

• Revenue from renewals

• Revenue from new customers

Generating Revenue Projections:

SaaS Revenue from Existing Contracts

Each existing contract will have a revenue schedule, which typically runs only through the end of the present term (but there are plenty of exceptions). This schedule includes fees for subscription services and other items the accountants determine must be recognized over time. In addition to the scheduled revenues, you need to include any variable, transaction, or usage fees. Typically, these are calculated, recognized, and often billed in arrears.

Revenue from Renewal Contracts

To generate revenue projections, you must also project renewals. For all contracts expiring within your projection period, you must create projections. For these projections, you must create a revenue schedule.

Projections are typically created using a simple renewal rate or churn number. A more sophisticated approach is to use different renewal rates for different segments. The most accurate approach, if your business supports it, is to project individual contracts. Obviously, this is only possible if you have either a limited number of contracts and sufficient customer interaction to gauge customer health, or you have an algorithmic-based approach based on actual usage information pulled from your application.

Revenue from New Contracts

These are revenues from new sales, again with subscriptions, variable fees, recognition schedules, etc.

How do you make revenue projections?

In order to generate revenue projections, your company needs to calculate your projected income and projected expenses, and then take the difference between them: Projected revenue = projected income – projected expenses

How do you do revenue projections in Excel?

To learn best practices for projecting revenue in a SaaS business, check out our Guide to SaaS Revenue Modeling.