Simple ARR Forecast (Revenue/Churn)

What's Inside

This simple ARR forecast template is ideal for when you want to forecast your revenue based on the health of your customers. We designed it for companies with a subscription service revenue model.

To calculate your ARR forecast, this model uses a list of your existing customers, the current annual subscription amount, the customer terms and overall customer health. In turn, the template provides you with a simple recurring revenue projection.

This new recurring revenue projection then becomes your new top-line forecast, which means you'll have a strong idea of where the business is headed.

We designed this model to calculate each account's chance of expansion, contraction and churn. Color-coded flags (green, yellow or red) give you quick and easy at-a-glance information.

A few more details:

• The account health drivers table calculates the weighted average of the different health ratings (i.e., 68 of 80 accounts are  green, so green health has an 85% weighting).
  
  
• We input assumptions for churn, expansion, and contraction (sheet: data, column I).
  
  
• The starting MRR value on the data tab includes new sales as part of it's calculation (i.e., new sales revenue are including in starting MRR the month after their term starts).
  
  
• The starting MRR value on the data tab includes churn as part of it's calculation (i.e., new sales revenue are including in starting MRR the month after their term starts).

The end result is a projection of recurring revenue of your subscription business that can then be used to drive sales to a forecast that is based on clear metrics.

One of the best ways you can capitalize on opportunity and mitigate risk is to practice proactive future vision. Consistently looking at what you expect to happen and making the appropriate adjustments will keep you on track to meet—or surpass—your goals.

Use with Cube

This is an Excel template. You don't need to be a Cube customer to use it!

But if you are a Cube user, you can start using this template in under two minutes. Here's how.

Step 1: Open the template in Excel or Sheets.

Step 2: Customize the row and column headers to match your Cube's dimensions and filters.

Step 3: Select the range where you want to fetch your data. 

Step 4: Fetch your data.

Best Practices for ARR Forecasting

Utilize these best practices into your FP&A strategy to help ensure accurate predictions, informed decision-making, and long-term business growth.

• Segmentation for Precision: Break down your customer base for tailored, accurate forecasts.
• Utilize Historical Data Wisely: Leverage meaningful insights from historical data while filtering out noise.
• Regularly Update Assumptions: Keep assumptions current to align with dynamic market conditions.
• Collaborative Input: Involve key stakeholders for holistic insights and improved accuracy.
• Scenario Analysis: Plan for uncertainty by incorporating multiple scenarios into your forecasting process.
• Cross-Functional Alignment: Foster alignment between finance and other departments for shared goals and accurate forecasting.

Common Mistakes to Avoid When Using an ARR Forecast Template

By avoiding these common mistakes in your ARR forecast template, you can enhance the accuracy of your financial predictions and make more informed decisions. 

Remember, a well-optimized template not only serves as a powerful tool for strategic planning but also contributes to the overall success and sustainability of your business.

Overlooking Customer Churn: Failing to accurately account for customer attrition can significantly impact ARR projections. Ensure your template considers historical churn rates and incorporates realistic expectations.

Ignoring Seasonality: Many templates may overlook the seasonal nature of certain businesses. Incorporate seasonality factors to produce more accurate month-to-month predictions and avoid misleading trends.

Neglecting Pricing Changes: Changes in pricing structures directly affect revenue. Regularly update your template to reflect any adjustments in product or service pricing to avoid discrepancies in forecasting.

Inconsistent Data Sources: Relying on disparate data sources can introduce inconsistencies. Consolidate data from reliable sources to maintain accuracy and coherence in your ARR forecast template.

Underestimating Customer Expansion: Focusing solely on customer acquisition without considering expansion within existing accounts can lead to missed revenue opportunities. Factor in upselling and cross-selling potential for a comprehensive forecast.

Failure to Adjust for Market Trends: Industries evolve, and market dynamics change. Regularly review and adjust your ARR template to accommodate shifts in market trends, ensuring your forecast remains relevant.

Additional Resources

• Track and control revenue churn to keep your best customers
• MRR vs. ARR: recurring revenue in SaaS is still important
• LTV/CAC ratio: your secret weapon to measure sales & marketing ROI

Grab Your Free ARR Forecast Template

Our free ARR planning template for Excel is designed to help you better forecast your revenue and monitor your OpEx costs.

Enter your business email to the right and download the template to get started immediately.