‍What Are Revenue Projections?

Revenue projections estimate how much income your company expects to generate over a period of time. In SaaS, they are essential for budgeting, fundraising, hiring, and strategic planning.

Forecasting revenue helps SaaS businesses:

• Predict cash flow to time major investments
• Set sales and marketing goals grounded in reality
• Determine resource allocation by product or segment
• Adjust plans quickly in response to churn, market shifts, or demand changes

3 Critical Inputs in SaaS Revenue Forecasting

To build accurate projections, you must combine:

1. Revenue from existing customers – Contracted revenue scheduled via MRR/ARR.
2. Revenue from expected renewals – Use retention or churn data to estimate.
3. Revenue from new business – Model new customer wins based on pipeline, win rates, and sales cycles.

Common SaaS Forecasting Models

Different forecasting models suit different stages of growth:

Historical Forecasting

Use past performance plus a projected growth rate to estimate future revenue. Best for stable businesses.

Sales Cycle Forecasting

Estimate based on current pipeline and average time to close. Ideal for sales-led SaaS with a predictable funnel.

Test Market Forecasting

Launch new products in limited segments and extrapolate based on performance.

Multivariable Analysis

Combine churn, retention, seasonality, campaigns, and sales data to build dynamic projections. Powerful, but data-intensive.

How to Forecast Revenue Growth

Step 1: Estimate Projected Income

Analyze your best-selling plans, busiest sales months, and expected growth. Example:

• 10,000 subscriptions sold last year at $60 each = $600,000
• Projecting 20% growth = $720,000 projected income

Step 2: Estimate Projected Expenses

Factor in delivery costs, employee salaries, infrastructure, tools, and overhead. Example:

• Cost per subscription = $19
• 12,000 projected subscriptions = $228,000 in expenses

Step 3: Apply the Revenue Projection Formula

Projected Revenue = Projected Income – Projected Expenses

$720,000 – $228,000 = $492,000 projected revenue

Types of Revenue in SaaS Projections

Revenue from Existing Contracts

Most SaaS platforms recognize revenue over time. Use your revenue recognition schedule and include:

• Subscription revenue
• Variable usage fees
• Onboarding or training

Revenue from Renewals

Base this on:

• Historical churn or renewal rates
• Customer health scores
• Segment-specific retention trends

Advanced teams use predictive modeling or contract-level forecasting for maximum accuracy.

Revenue from New Customers

Pull forecasted sales from your CRM and apply:

• Close probabilities
• Historical deal sizes
• Expected conversion rates by funnel stage

Include both recurring and one-time revenue (e.g., setup fees).

Final Thoughts

Revenue projections aren't guesswork—they’re the bedrock of every major financial decision in SaaS.

Whether you're building your first model or refining one for your next board meeting, the ability to forecast revenue with clarity gives you the confidence to scale—and the credibility to raise capital.