What is SaaS revenue forecasting? (And why do startups need it?)
Software as a Service (SaaS) companies rely on recurring revenue to sustain their business. As such, it is critical for SaaS startups to forecast their revenue accurately to make informed decisions and plan for the future. In this article, the planning experts from Blox will explore what SaaS revenue forecasting is and why startups need it.
What is SaaS revenue forecasting?
SaaS revenue forecasting is the process of estimating the future revenue of a SaaS company based on historical data, market trends, and assumptions. Revenue forecasting helps SaaS companies to plan for growth, allocate resources, and make informed decisions about pricing, product development, and investment.
Why do startups need SaaS revenue forecasting?
1. To plan for growth
SaaS startups need to plan for growth to stay competitive in the industry. Revenue forecasting helps startups to set ambitious yet realistic goals for revenue and customer acquisition, as well as identify the resources and strategies needed to achieve them.
2. To allocate resources
SaaS startups have limited resources, and they need to allocate them effectively to maximize their impact. Revenue forecasting helps startups to prioritize their investments in product development, marketing, and sales, as well as evaluate the ROI of their spending.
3. To make informed decisions
SaaS startups need to make informed decisions about pricing, packaging, and positioning their products to attract and retain customers. Revenue forecasting provides startups with insights into the impact of pricing changes, feature upgrades, and other business decisions on their revenue and profitability.
4. To attract investors
SaaS startups often rely on outside funding to fuel their growth. Revenue forecasting helps startups to communicate their vision and potential to investors, as well as demonstrate their ability to generate predictable and sustainable revenue over time.
How to do SaaS revenue forecasting?
SaaS revenue forecasting requires a combination of data analysis, market research, and strategic thinking. Here are some steps to get started with revenue forecasting for your SaaS startup:
- Gather historical data on revenue, customer acquisition, and retention.
- Analyse market trends and competitors’ performance to identify growth opportunities and threats.
- Develop assumptions and scenarios based on different growth rates, pricing strategies, and market conditions.
- Build a revenue model that incorporates all the data, assumptions, and scenarios.
- Validate the model with real-world data and adjust it as needed.
- Use the model to forecast revenue and evaluate the impact of different business decisions.
In conclusion, SaaS revenue forecasting is an essential tool for startups to plan for growth, allocate resources, make informed decisions, and attract investors. By forecasting their revenue accurately, SaaS startups can maximize their chances of success in the competitive SaaS industry. And doing so needn’t be a daunting task. AI-powered planning tools such as Blox enable leaders to make better, faster decisions with their free-to-use marketplace of expert-built financial planning models.
