dahrah

When coming up with a financial plan, at some point you’ll likely get to a confluence where you have a sense for where you want to get your startup’s revenue to and how much demand you’ll be able to generate, but you don’t know if this demand will be enough to meet your lofty revenue ambitions. At this point, planning can feel a little bit like the infamous “underpants gnomes” South Park episode . So how do you tie these two together and can you get a sense for how these different parts fit together?  One framework you can use is to think through the efficiency with which you convert demand into revenue. How efficiently you convert demand into revenue can be expressed as a product of two factors: Your close rate (what percentage of expressed interest do we convert to paying customers), and; Your average transaction size (or deal value, order value, etc.) This article will introduce a framework that will allow you to assess the feasibility of your revenue plan given your demand foreca