Project your business revenue for 12 months across three scenarios — pessimistic, realistic and optimistic. Enter your starting customers, average order value and monthly growth assumptions to see where the business could land.
| Month | Pessimistic | Realistic | Optimistic | Customers (R) |
|---|
Revenue projections are both essential and dangerous. Essential because every decision — hiring, investment, pricing — depends on expected revenue. Dangerous because founders systematically overestimate growth. The three-scenario approach — pessimistic, realistic and optimistic — forces honest thinking about the range of outcomes and prevents the common trap of building plans around the best-case scenario.
A single revenue forecast is almost always wrong. Market conditions change, customer acquisition takes longer than expected, churn is higher than modelled, and prices need adjustment. Three scenarios force explicit thinking about assumptions: what needs to be true for the pessimistic scenario, the realistic scenario, and the optimistic scenario. Investors expect three scenarios. Sophisticated founders plan for the pessimistic while executing for the optimistic.
Monthly Recurring Revenue (MRR) = Customers × Average Revenue per Customer. MRR growth = (New customers × AOV) − (Churned customers × AOV) + (Expansion revenue from existing customers). Tracking each component separately allows precise diagnosis of growth problems: is churn the issue, acquisition, or expansion?
Monthly churn of 5% sounds small. At 5% monthly churn, you lose 46% of your customer base every year. To grow from 50 to 100 customers at 5% monthly churn and 8 new customers/month, it takes 20+ months. Reducing churn from 5% to 2% has the same revenue impact as doubling new customer acquisition — often at far lower cost.
Build a customer model: start with current customers, add expected new customers per month, subtract churned customers (monthly churn rate × customer count), multiply remaining by average revenue per customer. This bottom-up approach is far more credible than top-down "capture 1% of the market" projections. Add an AOV growth assumption if you expect to upsell or raise prices.
Y Combinator benchmarks for good startup growth: 5-7% week-over-week in early stage, 15-20% month-over-month during scale. For more established SMEs: 10-30% year-over-year is considered strong growth. Most UK SMEs grow at 5-15% annually. B2B SaaS typically targets 20-40% ARR growth. Always sanity-check growth projections against customer acquisition capacity and market size.
MRR (Monthly Recurring Revenue) is the predictable monthly revenue from all active subscriptions or retainer contracts. ARR (Annual Recurring Revenue) = MRR × 12. These are the key metrics for subscription businesses because they represent predictable, committed revenue as opposed to one-time sales. Investors value SaaS/subscription businesses primarily on ARR and ARR growth rate.