Financial modeling aims to evaluate your plan’s coherence and reasonableness. Models test whether you’ll achieve your goals if your initiatives deliver the productivity you expect. They also make your assumptions explicit, enabling you to judge whether they’re reasonable.
This revenue model allows you to analyze multiple sales channels and multiple products. It captures the idea that different channels will be suitable for different products. For example, automated website signups will yield customers with a very different revenue and churn profile than an enterprise sales team.
It also captures the idea that some channels sell a mix of products. For example, your small business sales team may sell two products with a predictable distribution between these two. Your mid-market sales team may also sell those two products but with a different distribution. This model allows you to analyze that distinction.
To use the model, input the resources you’ll deploy, enter the productivity you expect, and review the key metrics that the model automatically calculates to test the coherence and reasonableness of your plan.
The metrics are: (1) customer count net of churn, (2) total monthly revenue by product net of churn, (3) new monthly revenue by channel and by product, (4) customer acquisition cost (CAC) by channel, (5) total customer lifetime value (LTV) acquired to date, (6) new LTV acquired in each month, (7) average LTV by channel, (8) LTV/CAC by channel, and (9) the magic number.
You can download it at this link: Revenue Model Final
First go to the inputs tab.
For each of your products, supply numbers for monthly recurring revenue and monthly churn. You can rename each product if you like.
Then consider each of your sales channels. You might have a small and medium business sales team, a mid-market sales team, an enterprise sales team, inbound leads from your website, and a value added reseller program. Input the monthly cost of each channel, the number of opportunities it generates, and the conversion rate of the opportunities to each of your five products and to no sale. Include your estimates for future costs, opportunity generation, and conversions to outcomes.
Finally, have a look at the graphs tab to see each of the results in living color.