Q14 / REVENUE

Problem 8

Why is my plan always wrong?

You don't have a plan. You have a wish.

Plan to an ARR, MRR or revenue target - and see why those three numbers are never quite the same.

Time: 3 MIN
Who: SOLO
Stage: STAGES 2-3
Access: FREE

The short answer

How much new MRR do I need each month to hit my target? Use the Rule of 78. A customer who signs in January pays 12 times this year, December pays once: 12 + 11 + ... + 1 = 78. Divide your revenue gap by 78 to get the new MRR you need to add every month. For 6 months, use 21.

How it works

Enter where you are and the target (ARR, MRR or recognised revenue).
See the monthly new MRR - and customers - you need.
Record actual new customers and churn separately beside the forecast.

Worked example

$250k ARR, $1M revenue target, $10k a year per customer. The obvious answer is 6.25 new customers a month. The real answer: $750k / 78 = $9,615 of new MRR a month - about 11.5 customers. Nearly double. That's one sales rep or two.

FAQ

Why is ARR different from revenue?

ARR is a run rate. Revenue is only recognised as you deliver the service, month by month.

What happens if I miss a month?

Your actuals stay beside the forecast so you can compare what happened with what you planned.

Do I need this at Stage 1?

No. Start tracking at Stage 2.

From the book

Problem 8 - Why is my plan always wrong?

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