Revenue forecasting belgium phone numbers helps you plan your expenses (how much to invest in product development, whether to hire new employees).
Customer churn rate
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Lost customers are lost revenue and should be deducted from ARR, but how do you determine customer churn rate? There are different methods used.
For example, Andreessen Horowitz divides the number of clients remaining by the number of clients at the start of the counting period (new deals done during that period are not counted).
Different monthly churn rates are typical for different geographies. For example, for some services, 20% churn is normal, while cloud subscription services should see no more than 5-7% churn. The less churn, the more investors will be interested in the business.
Let's say the projected revenue by the end of the year is $100, then you subtract 10% of churn (a very realistic figure for B2B) and you get $90 of annual revenue. Even a small percentage of lost customers doesn't make a dent in the overall results.
Churn rate metrics help you figure out how many new members you need to bring in to meet your revenue plan.
Good Read: How to Reduce Customer Churn Rates with Content Marketing
Repeatable income
This metric represents the difference between recurring revenue and recurring expenses, so the higher the metric, the more free money a business has.
Let's say that of our planned revenue of $90, a portion will need to be invested in maintaining the quality features of our subscription service (e.g. data center costs for a SaaS company). This is our cost of goods sold (COGS), which we will spend approximately $20.
The other $10 goes towards business administration. This is a variety of tasks involving accounting, legal support and office space rental.
Don't forget about research and development (R&D). Most of these recurring costs are made up of engineer salaries. In our example, we'll budget $20 in annual revenue for this.
We will lose $10 because of member exit. We will spend $20 to maintain the quality of service. Another $10 will go into management. And $20 will go into innovation, which has to be developed first and then implemented effectively.
So, from the original plan of $100, the income is now only $40, which is 40% of the income that can be used to develop the business.
The amount of revenue is directly related to the recurring cost, the higher the latter, the lower the former. By calculating the expected amount of revenue, the company can understand how much money is left for development.
