Subscription(or Recurring Charges) revenue is realized when a user agrees to sign up for periodic recurring payments in order to access a specified level of service or functionality. Subscription payments will continue to occur monthly for each user until the user upgrades / downgrades or leaves your service through churn.
Some use cases are like services that involve signups, recurring billings, cancellation rates etc. Some good examples are magazine subscriptions, gym memberships, or software-as-a-service products. If your business is building a subscription service, creating a reliable sales forecast is a critical step to understanding how your business will grow, and what the key drivers of revenue growth will be.
Adding Unit Sales revenue stream
Click on Revenue tab and then click on ‘Add Revenue Stream’ button
Enter name for your revenue stream and then click ‘Create’
Revenue Model Type: For the revenue model type select ‘Recurring Charges’. Then click next
Customers: If you think you will have the same number of signups (Or Customers) per month, choose Constant amount and enter the number per month Otherwise go with varying amounts of customers, Churn rate is the percentage of customers that cancel your service in a given month—when they leave, they’ve “churned out” and are no longer subscribing. For your business to grow, you need to add customers at a faster pace than they are cancelling their subscriptions. If you're not sure how to estimate your churn rate, start with the number of customers you expect to cancel in a given month, and divide that by the total number of customers that you forecast at the beginning of that month.
Recurring Charges: Enter the amount you will charge as a recurrence to the each customers. You can enter a constant price, or varying prices over time.
Refund: Enter monthly percentage of revenue are you going to pay as a refund. This will help us to calculate accurate gross margin.
Time Duration: Select when the revenue for this unit sales stream will begin and end. then Click Save to prepare forecast for what you have entered:
Revenue Forecast: After you save all the inputs, Your all inputs will be used to calculate revenue forecast data, You can also manually edit values and excel formulas into the excel sheet. It will automatically save all the updates you made into the excel sheet. There is also options available to download and edit revenue stream inputs.
To know where does the Revenue appear on various financial reports, checkout Planned - Revenue Forecasts