This post was last updated on February 2, 2024.
Looking for a subscription revenue model template? Here we’ll discuss everything you need to know to craft one for yourself.
Trust us; it’s not rocket science.
So without further ado, let’s get started with template creation.
With a subscription revenue model, SaaS businesses generate recurring revenue by charging customers at regular intervals to avail of products/services.
The subscription revenue model is built to help enterprises establish long-term relationships with their customers.
This revenue model is popular and successful because it benefits both companies and customers. Companies enjoy revenue assurance and deeper relationships with their customers, allowing them to scale confidently.
Whereas the customers enjoy the convenience of auto-renewals and a higher value proposition. Additionally, it gives them flexibility with their contracts for subscription.
Moreover, companies can offer products/services at a lower cost when they can save on customer acquisition costs.
Deciding on the subscription fees and forecasting revenues requires you to create a subscription revenue model.
Here we’ll discuss creating a subscription revenue model template with customer churn calculation.
The rise of SaaS businesses has triggered the growth of subscription revenue models in the B2B environment.
However, creating a subscription revenue model template for SaaS businesses requires you to forecast cash flow and customer acquisitions.
Hence, to create a subscription revenue model template for your SaaS business, let’s begin with a customer acquisition forecast.
Forecasting the number of customers you might get is crucial for every subscription revenue model template. You can start by putting the expected number of subscribers for every month in a spreadsheet.
You can even break down the subscribers’ monthly count into the following categories in your template:
In your subscription financial model template, you should also include customers using the free version of your services and not just the versions you’re monetizing.
Moreover, if your subscription model offers different pricing plans, you can split your customer acquisition column to include all of them.
In order to calculate the correct value of total customers every month, you need to forecast the customer churn along with the new customer acquisition rate.
Customer churn rate measures the number of customers who have stopped doing business with you and stopped using your services.
To calculate your customer churn rate, just sum up the number of users that unsubscribed in a given period and divide that figure by the total number of users in that particular period. Multiply the result with 100 to get the customer churn rate.
To ensure the success of your subscription revenue model, you can track customer behavior using the following subscription metrics:
Although these three subscription metrics correspond to customer behavior, you have to track them separately in your template.
The pre and post-sign-up behavior differ in intensity, whereas inactive users count is very useful to predict customer churn.
With ample customer behavior data, you can calculate inactive users to unsubscribers' rates and other intelligent indicators that can help you develop a foolproof subscription revenue model template.
Not every user is a paying customer. And given that you offer several pricing contracts, it isn’t possible to calculate or predict total revenue in your template by just multiplying the subscription rates with the total customer count.
You need to categorize your customers as per their subscription plans and then multiply their counts with their related subscription fees.
If you’re planning to reduce your subscription prices in the future or modify your offerings on them, include that in your template by putting a separate column for discounts and subtracting it from the subscription rates.
This would help you figure out the potential monthly revenue generation from the paying customers.
You need to include your expenses in the subscription revenue model template too.
The customer cost and acquisition cost calculation should be linked to the subscriber prediction and reflect the cost of providing them with the services.
You can divide the customer expenses into two sections in the template:
One-time Customer Cost: Costs that occur once, like customer acquisition cost, signing-up, and verification costs.
Recurring Customer Expenses: Here, you need to include the expenses directly related to your service to customers like hosting, operating expenses, revenue share, licensing fees, third-party integration fees, etc.
The recurring costs can be further divided into fixed and per-customer expenses.
You’d need help from your finance team to get this step right. They can calculate the direct customer costs and further break them down into fixed and variable ones.
With all the data you’ve gathered for your subscription revenue model, it is now easy for you to calculate the customer lifetime value (CLV), one of the most important SaaS metrics.
You can use the customer churn and financial business models to calculate how much an average user will contribute to your cash flow.
If it sounds complex to you, here is how you can calculate your customer lifetime value in your template:
You can also include general and operating expense forecasts to make your subscription revenue model template more intelligent.
Get the expenditure information from your cash flow and income statement showcased in your financial projections.
You’ll be continuously using and adding information to your subscription revenue model template.
Hence, it’s mindful to include a summary where you can compare your current month's revenue stream with your projections.
Also, don’t forget to add insightful graphs to the template, summarizing your financial plans for the upcoming months.
To calculate net revenue in a subscription-based revenue model every month, you can use the following formula:
[(customers subscribing to your services) x (subscription fee of every customer)] - total direct customer cost
2. How does a B2B subscription revenue model function?Generally, B2B subscription revenue models are based on customers subscribing to your services for a recurring cost every month/year.
However, the functionality of a subscription revenue model in a B2B environment depends on the contract the business sign with its customers.
3. What is a subscription-based revenue model?With a subscription revenue model, SaaS businesses generate recurring revenue by charging customers at regular intervals to avail of products/services.
4. What are the three essential steps critical in developing a subscription-based revenue model?The three most crucial elements of every subscription-based revenue model are:
5. How do you forecast subscription revenue?
Forecasting subscription revenue is not rocket science.
Here are the steps you can follow to forecast your subscription-based revenue model:
Managing a subscription-based SaaS business isn’t a cakewalk. You need to put financial and marketing brains together to roll out the best subscription revenue models.
In this post, we’ve discussed how to create a subscription revenue model template.
But, if you need help in managing your entire cycle of B2B customer subscriptions without managing a template, feel free to contact Younium.
You can book a free demo of our platform and embark on your SaaS journey while ensuring that you’ve got all the metrics under your watch.