Intelligence-driven, scalable insights for onboarding, adoption, retention, and revenue growth.
Understand your customers interactions with your product and make informed product success decisions.
Bring efficiency, add scale, and connect user behavior to personalized actions.
Define and track onboarding by phase, user progress, account, and portfolios.
Identify, monitor, and execute timely account expansions with real-time reports and indicators.
Proactively identify at-risk customers and prevent churn using automation, early warning insights, and more!
Optimize product usage by monitoring in-depth user data and receiving actionable insights
Improve decision making and actions for enhanced outcomes.
Get a complete view of your customer and all their moving parts.
Create the right scoring system for your organization.
Deliver consistent customer experiences and repeatable success.
Increase your productivity real-time, automated alerts.
Create groups across accounts and users.
Drive adoption, upsell and cross-sell using extensive product data.
Reach out to groups of customers when you need to.
Create surveys to get timely feedback from your customers.
Automate your actions, alerts, surveys, and more.
Create and track tasks across teams.
Create alert rules that are flexible.
Manage, analyze, and optimize your customer interactions.
Proactively uncover key insights and receive data-driven recommendations for your team.
Transcribe your calls and catch key phrases used by customers to trigger actions.
Get status updates, warnings, and extensive reports at the right time so you can make effective decisions.
Create, monitor, and automate comprehensive Playbooks for every scenario.
We aren’t just any Customer Success platform. We have the insights, imagination, and technology that others don’t.
Our core values, team, and community
Come work with us!
Get in touch anytime.
Employee success drives customer success.
Don’t miss an episode of the Customer Success Intelligence Podcast
Our annual survey captures the current state of CS Intelligence and automation.
Resources for new and seasoned Customer Success teams.
Features and SDKs you can integrate into your apps.
Calculate the potential ROI you could achieve with SmartKarrot CS.
Revenue recognition is not that straightforward in a subscription-based business model. For a traditional revenue model, the forecasting job is quite simple and easy. You sell a product for $10 and your revenue is $10. As simple as that. But for a SaaS revenue forecast, you have to take many fact
Revenue recognition is not that straightforward in a subscription-based business model. For a traditional revenue model, the forecasting job is quite simple and easy. You sell a product for $10 and your revenue is $10. As simple as that. But for a SaaS revenue forecast, you have to take many factors into account.
There are many revenue streams that exist in a SaaS business. You have to consider the fresh purchase, the recurring revenue, the upgrades, and so on. Except for the fresh sales, the rest of the revenue streams depend on the kind of relationship you develop with your customers.
Relationship management plays a crucial part in deciding the amount of revenue you would generate through a customer. It also depends on the evolving customer needs and if you are able to provide solutions towards that end. Hence, in a nutshell, the SaaS revenue forecast needs many parameters to be taken into account. And we are going to see them all along with the best practices you must follow towards this. But, let’s start by understanding its definition first.
A SaaS revenue forecast is the estimate of total revenue a SaaS business would generate over a fixed period of time. This time period is usually a quarter or a year but it can be different as well. There are many parameters that are considered while predicting the revenue. They include market sentiments, sales pipeline, past financial performance and so on.
Companies use revenue forecasting for various purposes like allocating the budget on their business units for the next quarter. It is also helpful for the investors to know if the company’s stocks are worth buying or not.
Large enterprises forecast their revenue every quarter to decide upon factors like how much should they be investing more, or should they let their employees go, and so on. While smaller businesses usually conduct this exercise one or twice a year.
For the revenue forecast, the important aspect that defines the efficacy of this exercise is accuracy. The closer you are to making the right prediction, the better you can align your strategies with it. It is not an intuitive game. The most accurate forecasts are derived out of a data-driven thorough understanding of the business.
Having said that, let’s look at a few of those best practices that you can follow while performing a forecast. These best practices are grouped under three categories that we will be discussing below.
Fresh sales are the major source of revenue that can be leveraged to generate bigger revenues. There are multiple factors at play while forecasting this SaaS revenue:
You must begin with analyzing the past performance for making any future projection. Bring out all the numbers that you have in your historical records. The most important of that is last year’s annual recurring revenue (ARR). Now list down all the parameters that can influence this ARR for the next year.
For example, your company generated an ARR of $1 million last year. Now, what changes your company has gone through this year that will affect this ARR? These changes may include expansion of sales and marketing team, new product launches, new pricing, etc.
Based on the correlation of each factor with past ARR, you can predict their influence with modified values on the future ARR.
Your sales pipeline is a clear indicator of how much revenue you can expect to generate in the near future. You should have a previous record of the number of customers who were at one or the other stage as your current potential customers. Based on their conversion rate in the past, you can predict the same for this year. The time taken for the conversion is also a key factor in income forecasting of short-term and long-term durations.
A good way to forecast the revenue of the business also comes from the knowledge of your sales and marketing performance. How effectively have they been able to achieve their targets in the previous year? What is the current status of their targets? Have there been any new hires or attrition in the team? Has the sales and marketing team started using some new automation tools that have increased their efficiency? If yes, then can you quantify it?
These are few of the questions that you must consider to analyze the performance of the sales and marketing team. The greater in-depth knowledge you have of their performance, the more accurate your annual sales projection would be.
There are mainly two components for the existing customers that are the main sources of revenues. They are contract renewals and additional sales.
Based on early indicators, you must know in advance how many customers are likely to renew their contracts in the coming quarters or year. Consider the indicators like adoption rate, CSAT score, NPS score and so on for forecasting subscription revenue. These will give you a good sign whether they are going to bring in more recurring revenue or not.
Do not forget to include the number of new customers that are getting added in each quarter in the recurring revenue list.
Revenues from existing customers in SaaS keeps on growing with time. This is the beauty of SaaS business model. The growth comes from sources like:
The best way to predict your revenue forecast for add-on sales is to find the growth rate of your customer cohort in revenues in the past years. If two years ago, the growth rate was 5%, and last year it was 6%, then you can extrapolate it for the future taking the compounded effect in the growth rate.
Although churn is the most dreaded devil in your SaaS business, you cannot ignore it in your SaaS revenue forecast. If you are considering the factors influencing your revenue growth, you have to also consider those that amount to its depletion. Analyzing the overall ARR with churn rate for the past years would allow you to know its percentage effect on future earnings. The overall revenue through existing customers’ contract renewals must be adjusted with churn rate to arrive at a more precise estimate.
The financial planning and analysis processes that every SaaS company executes consider multiple factors to build their SaaS revenue forecast model. The FP&A combines an in-depth analysis of both operational and financial data to measure the growth of a company and to arrive at future predictions. Hence, SaaS companies should avoid relying on qualitative assumptions for their revenue projections.22
Forecasting is a hard-core quantitative exercise and must remain so. For all the qualitative measures you take, the effects can be seen in various KPIs. But when it comes to revenue forecasting, these measurable KPIs are the only inputs along with the financial history of the organization.
Anshi has over 12 years of experience in demand generation, digital marketing, and managing global teams. In her prior role as head of marketing operations for a high growth US healthcare tech organization she transformed marketing from cost to revenue center.
Published 20 Nov 2020, Updated 13 Dec 2021
In this blog, we talk about expansion revenue and the diverse ways you...
26 Sep, 2022
In this write-up, we dive deep into how enterprise software in SaaS is...
20 Sep, 2022
Here is our guide that discusses how SaaS tools and the cloud have giv...
15 Sep, 2022
Sign up for SmartKarrot’s newsletter.
See how SmartKarrot can help you deliverwinning customer outcomes at scale.