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Revenues

The default revenue model in the Standard Financial Model is prebuilt to handle a wide variety of business models. Here's an explainer on how it works.

The Revenues sheet is the core revenue model in the Standard Financial Model, built to work for a wide range of revenue models. For business-type specifics:

The Revenue Model assumption on Get Started selects which prebuilt structure drives the Revenues sheet.

Modifying or replacing the prebuilt revenue model with custom revenue streams is common. You don't need to change the Get Started selection to do that.

How to use

The prebuilt revenue model lives across two sheets:

  • Get Started — the primary inputs, the main place you interact
  • Revenues — calculations and more detailed assumptions

The model uses progressive inputs: core inputs on Get Started, full detail on Revenues. The revenue model can run entirely off Get Started, but Revenues lets you apply drivers to change inputs over time and add custom logic.

How it works

At a high level: grow a metric, convert it into another metric, model retention (churn), and calculate revenues and billings from it. Metric labels are inputs on Get Started. Calculations shift based on the revenue model selection (recurring, ecommerce, marketplace, etc.).

The model supports one or (optionally) two customer segments (personas, subscriber types, contract cycles, pricing tiers). Revenues links into Forecast, which carries the calculations through the rest of the model, statements, summary, and reporting.

Revenue model selection

The Revenue Model options:

  • Recurring — SaaS or subscription. Contract cycle length (1, 12, 4 months) defines the period.
  • Transaction — ecommerce, physical commerce, hardware. One-time or repeat.
  • Marketplace — earn a portion of gross transaction value. Set the primary revenue metric to GTV per revenue unit, then use the take-rate. Select this only if the revenue model is a take rate; marketplaces running subscription or transaction pricing should use those options.
  • Advertising — CPM or CPC. Mathematically equivalent to recurring; label revenue metric as ARPU.
  • Financial services — businesses that track account balances.
  • Top-down from market size — same math as marketplace. Revenue metric is market size; take rate is your share.
  • Not applicable — zeros out revenue calcs. Use if you're building your own revenue logic.

Modeling growth

The first Get Started section models growth.

Labels:

  • Operational metric — default Growth Units. Change to fit your business (e.g. customers, leads, sessions, MRR).
  • Revenue metric — default Revenue Units. Change to fit (subscription, customer, order, contract). Can match the operational metric to skip conversion.
  • Revenue model selection — sets the logic. Labels can be edited; adding new types requires supporting logic.

Growth and acquisition assumptions:

  • New Growth Units in first month — starting growth curve.
  • Starting date — will assume a full first month regardless.
  • Initial growth rate — percentage for the first month.
  • Growth rate change per month — creates a curve that changes over time. By default, the Revenues sheet applies -1 * ABS() to prevent accidental exponential growth. Edit on Revenues if you want increasing growth.
  • Seasonality — yes/no, uses seasonality on Get Started.
  • Viral coefficient (K) — virality per period. Invites per user * conversion rate. By default declines over time (assumes maturing product). More at Virality.
  • Virality base — which metric drives virality: new current period, new previous period, or end previous period. "New current period" excludes new-from-virality and conversion lag to avoid circulars.
  • Virality base unit — see above.
  • Cost per Acquisition (CPA) — optional, per paid growth unit. Not CAC — CAC = CPA / conversion rate. Can also be modeled directly on Forecast.
  • % acquired through paid — percentage hitting the CPA above.
  • Use Outbound Sales — optional. Turns on the outbound sales section on Revenues.

Written docs for outbound sales coming. For now, see the video and line-by-line notes in the model.

Modeling conversion and retention

Conversion:

  • Conversion rate per Growth Unit — percentage or number per growth unit. Change format from % to # for "adoptions per growth unit" cases (e.g. partner = 100 seats).
  • Same period or with lag — 0 converts same month; 1 converts one month later.
  • Seasonality — yes/no.

Retention:

  • Revenue Units segments — splits conversion into up to 2 segments (e.g. monthly vs annual, pricing tiers).
  • % to each segment — typically sums to 100%. Can exceed if modeling multiple business models.
  • % Churn Rate — paired with the contract cycle below.
  • Every month / N months — contract cycle. 1 = monthly, 12 = annual, 3 = quarterly. Label updates accordingly.
  • Cost per Retention — optional, per paid revenue unit.
  • % retention via paid — optional.

Modeling recurring and transaction revenues

Revenues and cash:

  • Revenue Units at end of [start month] — starting customer count. Growth inputs cover new units; this sets the opening balance. Default is zero.
  • Average Revenue per Revenue Unit per period — label only; overwrite the formula if useful.
  • Billed every N months — billing cycle. 1 = monthly, 3 = quarterly, 12 = annual. Drives deferred revenue when billings lead recognition.
  • Billed in full % — optional. Split of contract billed upfront vs at end. 100% = all upfront. Most users leave the default.
  • % of average revenue per unit as revenue — optional. For take-rate or account-balance models.
  • $ per revenue unit as revenue — optional. For volume-based takes. Input the take per metric (not per transaction).

Linkage to Forecast and MRR/ARR reporting

Common Modifications

The prebuilt revenue model is highly customizable:

  • Additional growth channels. Add them on Forecast with whatever logic you want, then sum into the total used for conversion.
  • Additional conversion steps. Edit the calculations on Forecast, optionally adding inputs to Get Started for consistency.
  • Additional revenue streams. Use the drivers in the revenues section on Forecast to model revenues off any operating metric (e.g. # of subscribers * avg monthly revenue).
  • Custom revenue models. Build your own and link revenues, billings, and operating metrics into Forecast.