Revenue Model Example: Forecasting in Excel

Example Revenue Model Download: https://bit.ly/3x1zTgK
Revenue Model Blog Post (Poindexter): http://bit.ly/revenue-model-ex
Revenue Model Framework (Lucidity): https://bit.ly/3xcBxMS

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Video Content
0:00 - Introduction
0:55 - What is a Revenue Model?
1:49 - 5 Parts of a Revenue Model
3:45 - Revenue Modeling in Excel
5:45 - Adding our First Revenue Stream
7:01 - Modeling Lead Conversion
8:30 - Including Existing Customers in the Model
10:25 - Calculating Revenue from Customers
13:04 - Applying New Concepts to Customer Acquisition
13:47 - Adding Churn to the Revenue Model
15:37 - Taking the Model a Step Further
17:24 - Conclusion

About this Video
Revenue modeling is a great skill to have if you'd like to raise money from investors, get a loan or just plan the success of your business. In this video, we teach you the basic skills required to produce
revenue models in Excel starting from scratch, so there's no prior experience required.

We'll start by covering the revenue model definition and then get into the 5 components that determine the shape of your revenue model. With this solid foundation in place, we'll start setting up our model in excel.

One of the key elements missing when we look at the revenue model alone is that we don't have any way to forecast revenue. In order to develop a proper forecast, we need to look outside of the revenue model itself and take a look at the revenue driver, which for many businesses is something like customer acquisition. This will be the first topic of focus in building our model. Once we have something to feed into our revenue model, we'll add our first revenue stream.

Revenue streams can be as simple or complicated as needed, so this video aims to teach you some basic principles you can apply to models of any complexity. One fundamental concept is the idea of conversion. Typically, every prospective customer isn't going to purchase every product or service we offer. This means we need to account for the fact that different customers purchase different things (unless we only sell one thing). That is exactly what we'll cover in the conversion section of the tutorial.

The next core concept in our revenue modeling journey is addressing the idea of an existing customer base. Generating revenue from newly acquired customers is a great starting point, but it can be quite costly to rely on new leads alone as a source of revenue. This is why we'll want to include revenue from repeat customers we have already acquired. Repeat customers are much cheaper to monetize and indicate the sustainability of our business model.

Once we've included the two primary sources of revenue, new and existing customers, we can then calculate revenue from each segment. Now that we've gotten this far, the calculation for revenue tends to be straightforward for simple transactions but can also be quite complex once we start to consider contracts, recurring payments, and other variables. We don't dive into the particular details for complex transactions. Still, based on everything we've learned until this point, we should be in a good position to figure out how to modify the revenue model to suit more sophisticated needs.

The last concept we cover in the tutorial is that of churn. Although we may not like it, some customers will never buy from us again, which is where the idea of churn comes in. Churn is used to represent the fact that some portion of customers essentially fall off the earth to our business. We'll need to add churn to our model, so we don't overrepresent revenue from existing customers.

With the basics of revenue modeling covered, we finish off the tutorial by discussing some ideas to take the model a step further. Whether you want to add a second product or develop a more detailed customer acquisition model, the principles we've learned are the same.

This concludes our synopsis of the content in this video. If you have any comments or suggestions for future content, please leave it in the comments below.