SaaS Revenue Forecasting | Modeloptic
There are many reasons you might want to create a financial forecast, most of which boil down to either 1) helping you manage the business and understand its dynamics better, or 2) telling the story of the company to others (whether the internal team, senior management, the board, investors, or prospective investors).
Here we'll show you how to forecast revenue (and associated key metrics) for a subscription SaaS business.
If you'd like to follow along in Excel, here's the file we'll be walking through (though you'll still be able to follow along without it):
We'll start first by forecasting our number of active subscribers. To do this, we forecast two key components: The number of new subscribers in a given month, and the number of canceled subscriptions (or "churn").
To begin with a simple illustration, we'll assume that we win 10 new subscribers per month. We'll also assume that these subscriptions are cancellable any time, and that 10% of existing subscribers choose to cancel each month.
