Revenue forecasting is the systematic estimation of the revenue a company is expected to generate in a future period through the sale of its products or services.
For start-ups, it is a key component of financial planning. It shows what turnover can be achieved under certain assumptions and whether the business model can be economically viable in the long term.
A simplified calculation is as follows:
Planned sales volume × average selling price = planned turnover
For example, a SaaS start-up is forecasting an average of 500 paying customers and an annual turnover of 1,200 euros per customer for the coming year:
500 customers × 1,200 euros = 600,000 euros in projected annual turnover
Depending on the business model, other factors may be taken into account:
| factor | Meaning |
| Number of potential customers | How many customers can realistically be reached? |
| Conversion rate | How many prospective customers go on to become paying customers? |
| Average selling price | What is the revenue generated per sale or per customer? |
| Frequency of purchase | How often do customers make purchases during the planning period? |
| Customer loyalty | How many customers remain loyal to the company? |
| Seasonality | Does demand fluctuate over the course of the year? |
| Sales capacity | How many deals can the team actually close? |
Start-ups can use various methods for revenue planning:
- Top-down planning: Turnover is estimated on the basis of the market size and an assumed market share.
- Bottom-up planning: Turnover is calculated on the basis of specific customer figures, prices and sales assumptions.
- Historical planning: Existing turnover data will be carried forward to future periods.
- Pipeline-based planning: Expected deals are assessed on the basis of the current sales pipeline and their probability of closure.
The bottom-up approach is often particularly well-suited to young start-ups, as it is based on specific and verifiable assumptions.
Effective revenue planning helps founders to:
- to set realistic growth targets
- Planning staffing and capital requirements
- To assess liquidity and runway more accurately
- Determining marketing and sales budgets
- to compare different business models
- Justifying funding requirements to investors
As it is never possible to predict future turnover with complete certainty, various scenarios should be drawn up:
| Scenario | Meaning |
| Best-case scenario | a particularly positive trend in demand and sales |
| Realistic Case | the most likely scenario based on current knowledge |
| Worst-case scenario | cautious planning in the event of delays or lower demand |
Common mistakes in revenue planning include:
- unrealistically high customer figures
- overly optimistic conversion rates
- underestimated sales cycles
- failure to take notice of notices of termination
- Confusion between turnover and payments received
- seasonal fluctuations not taken into account
- lack of integration with marketing and sales activities
Sales forecasts should be regularly compared with actual results and adjusted accordingly. Any discrepancies provide important indications as to whether prices, sales processes or market assumptions need to be revised.
innoWerft helps founders to critically assess revenue assumptions, develop financial models and scenarios, and present their plans in a clear and comprehensible manner for internal decision-making and discussions with investors.