Sales Forecasting Template for SaaS Business
In this modern era, more and more activities are getting digital. With all these innovations, there’s no wonder almost everything that we do and use is paid monthly. While more press has been given to Software as a Service (SaaS) industries, these subscriptions are just around the corner, from music and movies, don’t be surprised that later our basic needs will also come in a monthly subscription. This article will attempt to elaborate forecasting template for SaaS business.
Defining SaaS Terminologies to build Subscription Forecast
Before you were able to forecast revenue and customer growth, you should initially understand these definitions.
Subscription Period: It is the length of time the customer commit to using your services. A bunch of subscription companies operates in a monthly subscription period, such as Netflix and Spotify.
New Subscribers: The number of new customers who sign up for your services in a particular month. Cancellations: These are the customers who chose to cancel their subscription to your service.
Churn: It is the percentage of customers that ultimately cancel their subscription during the month. All SaaS businesses shall pay close attention to their churn rate as this indicates whether customers are happy with your service or not. Churn rate is calculated as follows:
Churn = Cancellations during the month / Customers at the start of the month
Calculating Revenue from Subscription Services
Average Revenue per User/Customer (ARPU) : The amount you want to charge your customer each month.
Customer Lifetime Value (LTV): It is the amount of revenue expected from each customer during their lifetime with your service and expressed using the following formula:
LTV = ARPU / Churn Rate
Monthly Recurring Revenue (MRR) : This is the amount of revenue you want to make each month based on the following formula:
MRR = ARPU x (Starting Subscribers + New Subscribers)
Building a Forecast
Since you already have the basic knowledge of terminologies is SaaS industry, we will now build a sales forecasting template for a monthly subscription. Here is how it should look like.
This model is quite simple and assumes that it operates in a simple monthly subscription without any one time set up fees. Based on this model, you can adjust your ARPU level; some customers might upgrade for a high-priced subscription offered. Feel free to play with the figures to fit your terms.
Conclusion: Forecasting Template allows you to predict your desired revenue
In general, forecasting allows businesses to predict their target revenue or profit, thus making an effort to achieve what has been forecasted. Though it may be changed or altered depending on the situations, this drives the company to meet and exceed this forecast, which can be beneficial to the company and its workers.
