• Wade Myers

Modeling Sporadic, Repeat Customer Orders in Startup Pro Forma

Q: How do I create an offering in your business plan template where I expect customers to place multiple orders in the same year, such as several times per year, but not necessarily each month? I’m using website conversions as my sales forecast, so I prefer to continue linking my sales forecast to those assumptions.

Since the customer reorders, but the frequency is hard to predict and since we don’t recommend “false precision” of trying to guess exactly how often they reorder or exactly when they reorder or exactly what their order size is for each order, we’d suggest setting up the offerings as a recurring sales model with one order per customer per month. This way, your pro forma will show the fact that the nature of the customer is a recurring relationship once you’ve acquired them and your customer lifetime value will properly reflect the value of having acquired a recurring customer relationship. Here’s an example of your inputs in the Offering setup if you anticipate that each customer orders a total of $480 of product each year with a COGS of $180, whether they might order only a few times per year or many times per year: Offering Type: Monthly Recurring, Pricing: $40/month, COGS: $15. You can also input how long you anticipate a customer relationship will last and retention/churn rates, etc.

Example offering inputs:

While a customer may order $80 one month and none the second, etc., on an overall basis, your average order frequency and size should work out. This is an easy way easy way to model the aggregate average of customers that may order 2 – 24 times per years with order prices of $20 - $240 and the total revenue/customer/year and your Key Metrics will all make sense. And, you can still link to web conversions for your forecast for each of the offerings.

Additionally, if you prefer more granularity, you can set up additional offerings as “Large Customer” and “Small Customer” (several different such scenarios), with different monthly price points, perhaps one at $100/month and the other at $20/month and link them to your sales forecast from website conversions or from your three different channels you already set up as offerings. Our pro forma app allows you to input up to 15 offerings, so you have plenty of flexibility to enter different types of channels and customers from one-time to recurring and at different price points and order sizes and link them as appropriate.

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