ABC in Data - Revenue Forecasting

Revenue Forecasting Models

Each business has unique revenue drivers, and forecasting models should be tailored accordingly. I work with you to identify the specific factors that impact your revenue, refine your projections, and gain a deeper understanding of key business metrics. I build models that track actual data over time, allowing for continuous improvement and more accurate forecasting. My goal is to help you make informed, data-driven decisions that drive sustainable growth.

Below are examples of revenue models for different business types, outlining key revenue drivers and formulas to help forecast future earnings.

Manufacturing & Inventory-Based Business

E-commerce Business Revenue Model

Subscription Box (Physical Product with Recurring Revenue)

Professional Services (e.g., Consulting, Agencies)

SaaS (Software as a Service) Business Revenue Model

Direct Selling/MLM Revenue Model

Manufacturing & Inventory-Based Business

Key Revenue Drivers:

Demand Forecast – Based on historical sales trends and seasonality
Production Capacity – # of units that can be manufactured per month
Raw Material Availability – Determines if full production targets can be met
Wholesale vs. Retail Pricing – Different revenue per unit depending on sales channel
Stock Turnover & Waste – % of products that go unsold or are discarded

Revenue Formula:

Revenue = (Units Produced × Wholesale Price) + (Units Sold at Retail × Retail Price)
Units Produced = min(Production Capacity, Raw Material Availability)
Final Sales = Units Available − Unsold Inventory

E-commerce Business Revenue Model

Key Revenue Drivers:

Website Traffic – Visitors per month
Conversion Rate – % of visitors that make a purchase
Average Order Value (AOV) – Average spend per transaction
Repeat Purchase Rate – % of customers that return for additional purchases
Cart Abandonment Rate – % of users who add items to cart but don’t complete checkout

Revenue Formula:

Revenue = (Website Visitors × Conversion Rate) × AOV + (Repeat Purchases × AOV)
Repeat Purchases = New Customers × Repeat Purchase Rate

Subscription Box (Physical Product with Recurring Revenue)

Key Revenue Drivers:

# of Active Subscribers – Base subscribers at the beginning of the month + New sign-ups - Churn
Churn Rate – % of subscribers that cancel each month
Add-on Product Purchases – % of customers who add extra products to their subscription
Customer Acquisition Cost (CAC) – Cost to acquire each new subscriber
Referral Rate – % of customers who refer new customers

Revenue Formula:

Revenue = (Active Subscribers × Subscription Fee) + (Subscribers Purchasing Add-Ons × Avg Add-On Value)
Subscribers (Month N) = Subscribers (Month N-1) − (Churn × Subscribers) + (New Signups)

Professional Services (e.g., Consulting, Agencies)

Key Revenue Drivers:

Billable Hours Per Consultant – Hours worked per month
Hourly Rate or Fixed Project Fees – Rate per hour or per project
Client Retention Rate – % of clients that return for additional services
New Client Acquisition Rate – # of new clients acquired per month
Upsell Rate – % of clients that purchase additional services

Revenue Formula:

Revenue = (Billable Hours × Hourly Rate) + (Fixed Projects)
Billable Hours = (Consultants × Avg Hours Worked per Month) − Non-Billable Hours
New Clients = Leads × Conversion Rate

SaaS (Software as a Service) Business Revenue Model

Key Revenue Drivers:

# of Active Subscribers – Base subscribers at the beginning of the month + New subscriptions - Churn
Subscription Tiers – Users may be in different pricing plans (Basic, Pro, Enterprise)
Customer Acquisition Rate – Based on website traffic, conversion rate, trial sign-ups, and referrals
Churn Rate – % of customers canceling per month
Upsell & Expansion Revenue – % of users upgrading to a higher plan or adding seats

Revenue Formula:

Revenue = (Active Subscribers × Avg Revenue per User) + (Upgrades × Avg Upsell Revenue)
Active Subscribers (Month N) = Subscribers (Month N-1) − (Churn × Subscribers) + (New Signups)

Direct Selling/MLM Revenue Model

Key Revenue Drivers:

# of Independent Sales Consultants (ISC) – Base ISCs at the beginning of the month + New ISCs - Churn
Sponsoring Ratio – The number of new ISCs recruited per existing ISC per month
Churn Rate – % of ISCs that leave per month
Average Parties per ISC – The number of parties an ISC holds each month
Guest Attendance per Party – The average number of guests per hosted party
Sales per Party – Revenue generated per party based on average guest spending
Party Booking Rate – % of guests who book future parties
Compensation Structure – Percentage of sales paid out as commissions
Non-Compensable Revenue – Shipping fees, subscriptions, host benefit expenses, and discount codes used

Revenue Formula:

Total Revenue = Compensable Revenue + Non-Compensable Revenue
Revenue = (# ISCs × Avg # Parties per ISC × Revenue per Party)
ISCs (Month N) = ISCs (Month N-1) − (Churn Rate × ISCs) + (ISCs × Sponsoring Ratio per Party × Avg # Guests per Party)
Parties (Month N) = # Parties (Month N-1) + (Avg Guests per Party × Party Booking Rate)

Let’s Connect

If your business is overwhelmed by spreadsheets, drowning in too many data inputs without clear direction, missing critical insights, or struggling with forecasting, I’d love to help. Let’s talk about how you can use data not just to track performance, but to shape the future of your business.

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Revenue Forecasting Models

Manufacturing & Inventory-Based Business

E-commerce Business Revenue Model

Subscription Box (Physical Product with Recurring Revenue)

Professional Services (e.g., Consulting, Agencies)

SaaS (Software as a Service) Business Revenue Model

Direct Selling/MLM Revenue Model

Let’s Connect

Let's connect: Marc.JM.Trottier@GMail.com