Revenue forecasting projects future top-line growth based on driver-based models and assumptions tailored to your business.
Ask any finance leader what their most challenging task is, and revenue forecasting is likely near the top of the list.
No matter your level of experience, forecasting the top line is never one-size-fits-all. Each company has its own mix of inputs, processes, and systems, making revenue planning both highly customized and often complex.
But as challenging as it can be, getting your revenue forecast right is essential. Your company’s ability to meet growth targets and long-term goals depends on it—and for SaaS businesses, top-line performance directly impacts valuation, especially during investor conversations.
While every organization will approach forecasting differently, there are a few universal principles and best practices that can help finance teams plan more effectively. Here’s what you need to know to simplify the process and build more accurate, actionable forecasts.
What is revenue forecasting?
Revenue forecasting is the starting point for any strategic planning cycle. It projects future top-line growth based on driver-based models and assumptions tailored to your business. Done well, it sets the tone for budgeting, aligns the organization around growth goals, and helps leaders make smarter, more confident decisions.
There are many ways to model revenue—but before diving into formulas, it’s helpful to approach forecasting like a project manager. Here are three key considerations to get right from the start:
1. Timing
Revenue forecasts are often revisited throughout the year, but the primary process typically ties to your annual planning cycle. If your fiscal year ends in December, begin forecasting in October, just after Q3 wraps up. At that point, you’ll have a near-complete view of the year’s performance—giving you a solid foundation for conversations around realistic growth expectations.
2. Forecasting philosophy
Is your company highly collaborative, or more top-down in approach? If your planning process involves input from across the organization, account for that in your timeline—those conversations take time but can lead to stronger alignment. If your approach is more centralized, you can move more quickly but still need to create space for stakeholder buy-in.
3. Stakeholder alignment
Start early when it comes to getting key players on the same page. Sales, finance, and revenue operations may all have different perspectives on growth drivers. Aligning up front on assumptions and methodology will help avoid delays and confusion down the line.
When you take the time to get these foundational elements right, you set the stage for revenue forecasts that lead to informed, aligned, and actionable growth plans.
Why is revenue forecasting important?
Revenue forecasting gives you more than just a number—it outlines your company’s growth trajectory and supports smarter, more informed decision-making across the business. Revenue is tied to every core function: it reflects your customer base, informs hiring and product development, and fuels cash flow—which is the lifeblood of any company.
When done well, top-line forecasting does more than project future momentum. It creates ripple effects that impact every part of your organization:
Verifies your headcount plan
For SaaS companies especially, headcount is often the largest expense. An accurate revenue forecast helps ensure your hiring plan stays on track. Without it, you risk delaying growth-driving hires—slowing product development and limiting your ability to scale.
Refines customer acquisition strategies
Early-stage startups often need to invest aggressively to win market share. Forecasting helps define how much you can spend to acquire customers—balancing ambition with sustainability and giving marketing and sales the budgets they need to compete.
Builds trust with investors
Missing revenue projections quarter after quarter erodes board confidence. Instead of strategic conversations, you’ll be stuck explaining missed targets. Accurate forecasting fosters transparency, builds trust, and helps investors see the big picture.
To unlock these benefits, finance teams need to choose a forecasting approach that fits their business—and that starts with selecting the right revenue model.
Four revenue forecasting models to plan your top line
There’s no one-size-fits-all financial model for top-line planning—but there are a few core revenue forecasting methods you can tailor to your business. These four models span both top-down and bottom-up approaches, giving you the flexibility to triangulate your projections and increase confidence in your numbers.
1. Quota capacity model
Also known as a sales capacity model, this bottom-up approach uses historical performance data from your sales team—such as ramp times, average quota attainment, and rep productivity—to forecast future revenue. It’s especially useful for SaaS businesses with growing sales teams and structured quotas, offering a realistic view of how sales capacity will impact top-line growth.
Sales capacity models work well for companies with a sales-driven go-to-market strategy and a solid base of historical performance data. With clean CRM data, you can build a reliable sales ramp waterfall to forecast bookings based on your headcount plan.
This model factors in more than just headcount and ramp rates—it also includes quota attainment for both ramping and fully ramped account executives. The result? Detailed projections for new bookings, billing, revenue, and collections that tie directly to your sales hiring strategy.
2. The ARR snowball model
The ARR snowball model is another popular approach for SaaS revenue forecasting. It builds on trends in your ARR data to project future growth, typically broken down into key components: new ARR, upgrade ARR, downgrade ARR, and churned ARR. This breakdown gives finance teams a clear view of what’s driving net new revenue and helps shape more strategic, assumption-based forecasts.
Unlike a sales capacity model, early-stage companies can use an ARR snowball approach without needing highly detailed historical data. Instead of tracking granular sales ramp metrics, this model projects revenue based on recent growth trends—making it easier to forecast by month, quarter, or year.
While the sales capacity model is a true bottom-up approach, the ARR snowball is more of a hybrid. It blends top-down and bottom-up elements, using assumptions around seasonality, new customer acquisition, and average annual contract value (ACV) to shape projections. It’s less reliant on cross-departmental input, making it a good fit for leaner teams looking to forecast efficiently.
<<Download an ARR snowball model template from our finance experts.>>
3. The sales cycle to new bookings model
The sales cycle to new bookings model uses historical sales cycle trends to forecast future revenue. By analyzing data like opportunities created, deal conversion rates, time to close, and average booking size, you can build informed assumptions about how many leads you need to generate to hit upcoming goals. This method helps tie top-line projections directly to pipeline performance, giving sales, marketing, and finance a shared view of what’s needed to drive growth.
For a company that doesn’t have a large, mature sales function, this may be an easier approach to top-line planning than the sales capacity model. It’s also a simple way to sense-check your numbers if you primarily use a sales capacity model or an ARR snowball model to plan revenue.
4. The bookings, billings, and collections model
This top-down revenue forecasting model uses new customer counts and average revenue per customer to estimate net new bookings. By layering in historical net retention rates, you can also forecast renewals, billings, and collections.
Unlike the sales capacity or ARR snowball models, this approach takes a higher-level view—using broader assumptions to model overall business growth. It’s a useful method for setting directional goals and quickly assessing how different growth scenarios could impact the top line.
One of the biggest advantages of this model is its simplicity. Finance teams can build it quickly with minimal input from other departments—making it a great tool for kicking off the planning process. As long as you have a 3-month average ARR per customer and a 12-month average for net revenue retention, you can generate reliable revenue forecasts to guide early conversations.
(We’ll use this approach in our step-by-step walkthrough of building a revenue forecasting model.)
Key takeaways
- Revenue forecasting is essential for aligning business growth objectives and informing strategic decisions across departments
- Top-line forecasting models, including quota capacity, ARR snowball, sales cycle to new bookings, and bookings, billings, and collections, offer diverse approaches to accurate revenue predictions
- Understanding the timing, philosophy, and stakeholder alignment is crucial to a successful revenue forecasting process
- Accurate forecasts build trust with investors, optimize headcount planning, and refine customer acquisition strategies
How to build a revenue forecasting model in FP&A platforms
While Excel and Google Sheets offer flexibility, they’re not always the most efficient tools for revenue planning—especially in fast-paced, high-growth environments. Manually pulling data from multiple systems, managing complex assumptions, and responding to ad hoc updates can quickly eat into the time finance teams need for strategic work.
Today’s planning tools offer a better way. Cloud-based platforms now combine the familiarity of spreadsheets with real-time data integration—allowing you to build and maintain custom revenue forecasts that reflect the unique drivers of your business.
It’s time to take top-line forecasting beyond the spreadsheet
Revenue forecasting shouldn’t feel like a battle against spreadsheets and fragmented data. Modern finance teams need faster, more accurate ways to plan—and today’s tools make that possible.
With the right platform, you can streamline your forecasting process by combining real-time financial metrics, intuitive formulas, and flexible, spreadsheet-style layouts. These features allow finance teams to move quickly without sacrificing precision:
- Real-time metrics access: pull directly from a centralized metrics catalog to accelerate modeling with the latest data
- Intuitive formula builder: use smart functions and auto-complete features to create custom calculations fast
- Spreadsheet-style interface: modify cells, add rows, and copy/paste with ease—no learning curve required
- Cross-functional visibility: link your revenue model to income statements, balance sheets, and headcount plans for fully connected forecasting
- Scenario planning tools: duplicate models and adjust assumptions to quickly explore best-case, worst-case, and everything in between
- Goal setting and tracking: turn topline forecasts into measurable goals and track progress directly in your reporting dashboards
Forecasting revenue doesn’t have to be stressful or time-consuming. With the right tools, your team can move faster, plan smarter, and stay aligned on what’s next.
Revenue forecasting FAQs
How do you forecast revenue in Excel?
Excel’s “Forecast Sheet” feature lets you generate a basic forecast based on date-driven values. It can be useful for quick, trend-based projections. But in most cases, revenue forecasting in Excel requires manually building assumptions and writing custom formulas to estimate future performance.
The challenge? Excel lacks real-time data integration, and models often require frequent manual updates. This makes it harder for finance teams to move at the pace of the business. That’s why many teams turn to dedicated financial forecasting tools—to save time, reduce errors, and build more responsive, data-driven plans.
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How do you forecast revenue in Google Sheets?
Google Sheets includes a “FORECAST” formula that can be used to create simple revenue projections. It estimates future performance based on past revenue trends—helpful for quick calculations, but limited in flexibility.
In practice, accurate revenue forecasting in Sheets often requires building detailed assumptions and custom formulas to reflect your business model. Like Excel, Sheets doesn’t support real-time data integration, which means frequent manual updates and a greater risk of outdated insights—especially as your planning needs grow more complex.
What is top line forecasting?
Top-line forecasting—also known as revenue forecasting—is the process of predicting future revenue from product or service sales. It plays a critical role in planning and decision-making across the business.
It’s also important to distinguish between top-line and bottom-line growth: top line refers to total revenue, while bottom line refers to net income after expenses. Both matter, but forecasting the top line is what helps set the stage for growth, budgeting, and goal setting.
