Revenue Model

When to Use This Skill

Use this skill when you need to:

• Design a revenue model with pricing tiers and unit economics
• Calculate customer lifetime value (LTV) and acquisition cost (CAC) targets
• Build financial projections for the next 12-24 months
• Validate whether a business idea or pricing strategy is financially viable

DO NOT use this skill for full financial statements, investor pitch decks, or tax planning. This is for revenue modeling and unit economics analysis.

Core Principle

A REVENUE MODEL IS NOT A WISH LIST — EVERY NUMBER MUST BE GROUNDED IN REAL DATA OR DEFENSIBLE ASSUMPTIONS, AND THE MODEL MUST SHOW THE PATH FROM WHERE YOU ARE TO WHERE YOU WANT TO BE.

Phase 1: Brief

Required Inputs

GATE: Confirm inputs before building the model.

Phase 2: Revenue Architecture

Revenue Stream Mapping

## Revenue Streams

**Stream 1: [Core Product/Service]**
- Type: [One-time / Subscription / Per-project]
- Price: $[X]
- Frequency: [Monthly / Annual / Per engagement]
- Margin: [X]%

**Stream 2: [Secondary Product/Service]**
- Type: [One-time / Subscription / Per-project]
- Price: $[X]
- Frequency: [Monthly / Annual / Per engagement]
- Margin: [X]%

**Stream 3: [Additional Revenue]** (if applicable)
- Type: [Affiliate / Ads / Licensing / etc.]

Unit Economics

## Unit Economics

**Average Revenue Per Customer (ARPC):** $[X]
**Cost of Goods Sold (COGS):** $[X] per customer
**Gross Margin Per Customer:** $[X] ([X]%)
**Customer Acquisition Cost (CAC):** $[X]
**CAC Payback Period:** [X] months
**Customer Lifetime Value (LTV):** $[X]
**LTV:CAC Ratio:** [X]:1 (target: 3:1 or higher)

**Churn Rate (if subscription):** [X]% monthly
**Average Customer Lifespan:** [X] months

GATE: Approve the revenue architecture before running projections.

Phase 3: Financial Projections

12-Month Revenue Projection

Build a month-by-month projection:

## Monthly Revenue Projection

| Month | New Customers | Total Customers | Revenue | Cumulative |
|-------|--------------|-----------------|---------|------------|
| 1 | [X] | [X] | $[X] | $[X] |
| 2 | [X] | [X] | $[X] | $[X] |
| ... | | | | |
| 12 | [X] | [X] | $[X] | $[X] |

**Annual Revenue:** $[X]
**Average Monthly Revenue:** $[X]
**Growth Rate:** [X]% month-over-month

Scenario Analysis

## Three Scenarios

**Conservative (80% confidence):**
- [X] new customers/month, [X]% churn
- Annual revenue: $[X]

**Base Case (50% confidence):**
- [X] new customers/month, [X]% churn
- Annual revenue: $[X]

**Aggressive (20% confidence):**
- [X] new customers/month, [X]% churn
- Annual revenue: $[X]

Revenue Levers

Identify the 3-5 biggest levers for growing revenue:

1. Increase customer acquisition volume
2. Raise prices or add premium tier
3. Reduce churn (for subscription models)
4. Increase average order value (upsells, cross-sells)
5. Introduce new revenue streams

Phase 4: Polish

1. Key Assumptions Document

List every assumption the model is built on:

• Customer acquisition rate and growth
• Churn rate assumptions
• Pricing stability
• Market size constraints
• Seasonal fluctuations

2. Break-Even Analysis

Calculate the number of customers or revenue needed to cover:

• Fixed costs (tools, software, overhead)
• Variable costs (fulfillment, support)
• Desired owner salary

3. Model Review Schedule

• Monthly: compare actual vs. projected, adjust assumptions
• Quarterly: revise the full 12-month projection
• Annually: rebuild the model from scratch with updated data

Anti-Patterns

• Hockey stick projections with no basis — showing 10x growth without a plan to acquire customers is fantasy, not modeling.
• Ignoring churn — subscription models without churn estimates are wildly inaccurate. Even 5% monthly churn loses half your customers in a year.
• Single scenario planning — only modeling the best case leaves you unprepared for reality.
• Forgetting CAC — revenue means nothing if customer acquisition costs more than the customer is worth.
• Static pricing — the model should show how pricing changes affect the entire projection. Build in flexibility.

Recovery

• No data to base projections on: Start with industry benchmarks and the user's current acquisition rate. Model from reality, not wishes.
• Pre-revenue business: Build the model around break-even first. How many customers at what price covers costs?
• Multiple products, complex model: Focus on the core revenue stream first. Add secondary streams after the primary model is solid.
• User wants guaranteed numbers: Explain that models are estimates based on assumptions. The value is in understanding the levers, not predicting exact numbers.