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)

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.

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:

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:

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

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”.

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!

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:

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:

Now enter your expected monthly growth rate.

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

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!

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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.

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.

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

Products:

Monthly Revenue:

Revenue Streams:

Total Revenue Summary: