Recurring Revenue Assumptions
Q: I need to model a SaaS business. Is there an easy way to have the model calculate the previous months sales with the current months? For example: Month 1 has three new sales and Month 2 has those same three customers plus four new customers.
A: This is very easy to do with the model. You simply select Monthly Recurring as the sales model and then enter the other assumptions such as the contract length and the contract renewal rate. Then you only have to enter the number of new customers each month. With that, the model will automatically calculate the recurring customers and revenue by adding the existing customers to the new customers each month. The model will also calculate the proper customer attrition at the end of each contract period for each month that new customers are added. You can model these assumptions differently for each offering as some offerings may be One Time and some Monthly Recurring and some will have different contract lengths and different churn rates. The example below shows a Monthly Recurring offering with a 12 month contract length and an 80% renewal rate at the end of the 12th month for each new customer added: