How to Forecast Enterprise SaaS Revenue based on ACV:


What is Revenue Forecasting?

Revenue forecasting is the process of estimating what your revenue will be over a specific time period—typically monthly, quarterly, or annually.

What is Subscription Revenue?

Customers pay a recurring subscription fee (monthly, quarterly, or yearly) to get access to a product or service.

What is ACV?

Average Contract Value (ACV) is the average revenue generated from each customer contract, excluding fees. (Total Contract Value/Total Customers = ACV)

Step 1: Add Your Products


To get started with building your revenue forecast, add your products and pricing variables first.

Products are the subscription plans you will be selling. With enterprise-level plans, you can base your pricing tiers on the average price per customer size or plan level.

For this example, we will base our products on the average price per customer based on the subscription tier.

  1. Basic ACV – $2,000/month with $979.00 One-Time Set-Up Fee

  2. Standard ACV – $4,000/month with $1,979.00 One-Time Set-Up Fee

  3. Pro ACV – $11,000/month with $3,979.00 One-Time Set-Up Fee

Each plan level will be considered a separate product because customers can subscribe to any one of them.

To add those into Finmark, start on the Revenue Section and Click Add > Product.

Then, you’ll need to fill in the following details into the Product Pop-Up Screen:

  • Plan name

  • Price

  • Subscription Frequency (monthly, quarterly, or annually)

  • Churn Rate

If you’re unsure of what your churn rate is, check your actuals. If you don’t have the data on hand, you can estimate based on industry trends.

Now, select +Add Additional Pricing Plans to add the One-Time Set Up Fees:

Now that you've added your ACV and One-Time Set Up Fee's you can click Save, and repeat this process for each individual plan.

You will need to add a new product for each of the following plans:

  1. Basic ACV – $2,000/month with $979.00 One-Time Set-Up Fee

  2. Standard ACV – $4,000/month with $1,979.00 One-Time Set-Up Fee

  3. Pro ACV – $11,000/month with $3,979.00 One-Time Set-Up Fee

After you've entered all of your plans, you will be able to view these in the Revenue Summary under Products.

Step 2: Add Your Revenue Streams


To forecast your subscription plans revenue. You will start by adding a new revenue stream by clicking +Add then selecting Revenue Stream from the drop-down.

Start by giving your revenue stream a name. For this example, we will name our revenue stream “Subscriptions”.

Add Revenue Stream to Revenue Forecast

Next, you will select the products you will be forecasting in this revenue stream.

For this example. we will select all three of our subscription plans.

Once your revenue streams are in, it’s time to forecast your growth!

Step 3: Add Your Revenue Driver


You have your product and your revenue stream. The last part of the equation is your revenue driver.

A revenue driver is what your revenue growth is based on.

In Finmark, we give a few options for revenue drivers:

  • Base subscribers with monthly growth: Build your forecast based on your expected monthly growth rate.

  • Marketing-led conversion: Build your forecast based on conversions from marketing campaigns. This is a great option to forecast the revenue you’ll generate from marketing channels.

  • Sales-led conversion: Build your forecast based on sales quotas. If you have a sales team, particularly outbound sales with quotas, this will help you forecast the revenue they’ll drive.

  • Custom Amounts Over Time: Manually build your forecast by entering your projected customer growth for each month. This option is mainly used if you’ve built your model in a spreadsheet and just want to port the data over.

  • Custom Formula

If you want to see how to forecast with marketing and sales-led conversions, check out this guide.


For this example, we will stick with Base Subscribers with Monthly Growth.

Start by entering the following details:

  • Acquisition start date: What month do we want to start forecasting from?

  • Acquisition end date: If there’s a date you expect to stop acquiring leads, you’d enter it here. This is good for time-specific campaigns (i.e. summer sales) or if your revenue growth changes over time due to seasonality.

  • Initial customers: How many customers will you acquire on the acquisition start date? This is the base number of customers for your forecast. If you already have existing customers, you can enter those numbers here.

Now enter your expected monthly growth rate.

The growth rate you put here should be based on data. Ask yourself the following questions:

  • On average, how much have you historically grown your customer count MoM?

  • If you’re a new company and don’t have historical data, you can work backward based on your revenue and customer goals for the year.

Here’s a rough example of how it might work:

If you have a goal of reaching $200K ARR for the year, calculate how many customers you need to acquire in order to reach your goal.

$200K ARR works out to roughly $16.6K MRR. Now, let’s say you’re currently generating $6K MRR and have 120 customers. You need to add an additional 10.6K in new MRR throughout the rest of the year to reach your goal.

Your average revenue per account (ARPA) is $50 (6000/120). So you need to add about 212 new customers (10.6K/50) to reach your goal of $200K ARR. Based on those numbers, with a growth rate of about 5%, we can reach our goal in 12 months.

For this example, we will say we will grow at a 15% MoM rate.

Now you can click Add and see your revenue forecast!


Step 4: Forecast One-Time Set Up Fees


Now let's forecast our One-Time Set Up Fees.

For this forecast, we will base our forecasted set-up fees on new subscribers.

Start by adding a new One-time purchase revenue stream. We can call this revenue stream One-Time Set-Up Fees - Basic ACV.

Next, we will select the Basic ACV - $979.00 One-Time Set-Up Fee.

Then we will use a Custom Formula to base the revenue off of the forecasted number of new subscribers.

  • Revenue Driver: Select Custom Formula

  • Enter the Acquisition Start Date

  • Custom Formula: Subscibers.BasicAcv.New

This will drive your revenue forecast based on total new subscribers each month.

Repeat these steps for each of the One-Time Set-Up Fees.

Step 5: View your Revenue Summary


Now you can see the following details on the revenue section:

Products:

Monthly Revenue:

Revenue Streams:

Total Revenue Summary:

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