Forecasting and the Role of Churn in Software-as-a-Service Business Models

This article demonstrates a revenue

forecasting model for Software-as-a-Service (SaaS) business models. Due to the

highly predictable nature of subscriptions, a SaaS business can often project

future revenue on the basis of a few key metrics. However, understanding and

predicting the churn rate of the subscription base is critical to successful projections. The authors explain SaaS churn

and demonstrate the use of critical variables in a predictive SaaS revenue

model. The model allows a business to project future revenues based on

historical and expected customer subscription

behavior. The methodology combines research with the experience of a

senior executive in a SaaS-driven business to build the predictive platform.