Builds SaaS revenue models - a reconciling MRR/ARR bridge, cohort retention forecasting, a driver tree from leads to new ARR, and base/upside/downside scenarios. Use when someone asks "model my ARR for next year", "what will MRR be if churn doubles", "build a revenue forecast for the board", "why doesn't my MRR bridge tie out", or "what NRR do we need to hit our plan". Do NOT use for sizing the market opportunity - use market-sizing instead; for CAC, LTV, and payback analysis use unit-economics; for a full P&L or headcount-driven operating model use fpa-model; for cash timing and runway use cash-flow-forecast.
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name: Revenue Modeling
description: Builds SaaS revenue models - a reconciling MRR/ARR bridge, cohort retention forecasting, a driver tree from leads to new ARR, and base/upside/downside scenarios. Use when someone asks "model my ARR for next year", "what will MRR be if churn doubles", "build a revenue forecast for the board", "why doesn't my MRR bridge tie out", or "what NRR do we need to hit our plan". Do NOT use for sizing the market opportunity - use market-sizing instead; for CAC, LTV, and payback analysis use unit-economics; for a full P&L or headcount-driven operating model use fpa-model; for cash timing and runway use cash-flow-forecast.
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# Revenue Modeling
A revenue model that does not reconcile is a story, not a model. The costly failure mode is a forecast built from a single blended growth rate: it hides which lever (new logos, expansion, churn) is actually moving, so the plan cannot be managed and the miss cannot be diagnosed. Build the model from a bridge that must tie out and drivers that someone owns.
## Operating procedure
Steps run in this order because the bridge defines the accounting, the drivers feed the bridge, and scenarios only mean something once base-case drivers are pinned.
### Step 1: gather inputs
Collect, and label every unsourced number a guess:
- Beginning MRR (or ARR) and customer count, tied to the billing system or GL - not a spreadsheet someone remembers.
- Trailing 6-12 months of the bridge components: new, expansion, reactivation, contraction, churned MRR.
- Funnel history: leads (or pipeline created), lead→opportunity rate, opportunity→win rate, average deal size (ACV).
- Cohort retention: revenue retained by acquisition month at months 1, 3, 6, 12. If unavailable, start with logo churn and note the model is weaker for it.
- Billing mix (annual prepay vs monthly) - needed later to separate bookings, billings, and recognized revenue.
Defaults when history is thin: mid-market SaaS commonly sees 15-30% lead→opp, 15-25% opp→win, and 2-4% monthly gross revenue churn for SMB versus 0.5-1.5% for enterprise. Use these only as placeholders and say so.
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