Trick for SAAS Startups for Revenue Projecting

Byron Deeter and Peter Lee have written an excellent article on forecasting revenue for SAAS startups. The link is below, but basically, since a subscription-based SAAS startup should see an upward trend in revenue/month (even if only slight for low growth companies), due to the the subscriptions accumulating month over month, taking the July monthly revenues and multiplying by 12 should give a strong indication of the expected yearly revenues.

Due to the trending nature of such revenue models, this actually works surprisingly well. For high-churn startups (think freemium services with lots of people changing their mind) or with highly seasonal revenues, then the trick works slightly less well but can be compensated for in the model. I just tried this with one of our portfolio companies with highly volatile monthly revenues, at this trick still got within 13% of their yearly revenue for last year.

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