====== Why are my revenues 5.5 (or 4.6) times higher than what I think they should be during the first year? ======

If you are driving sales using BU-3 (Customer Acquisition and Retention), your revenues in year 1 could be 5.5 or 4.6 times higher than expected as the result of a combination of factors:

  - First, you are driving sales by either an expense item or a salary item that it being spent in 12 equal increments over the year.\\ \\
  - Second, you are assuming that sales occur two months after the expense occurs (sales cycle=2).\\ \\
  - Let's assume that you are spending $12,000 (on expense or salary) over the year. Thus you are spending $1,000 per month.\\ \\
  - Let's assume that you specified the customer acquisition cost (CAC) to be $10.\\ \\
  - Then, in months 1 and 2, you would spend $1,000 each, but acquire no customers.\\ \\
  - In month 3, you would acquire 100 customers (from your efforts of the first month).\\ \\
  - In month 4, you would acquire additional 100 customers (from your efforts of the second month), bringing your total customers to 200.\\ \\
  - In each subsequent month 5 through 12, you would acquire 100 additional customers, eventually bringing your total customers to 1000 at the end of the first year\\ \\
  - If your average order size (AOS) were, say, $100, you //might //  think you should receive $10,000 (or $12,000) in revenue for the year.\\ \\
  - But, the AOS is per //month//, not per year. So how many customer-months did you have during your first year? The answer is 0+0+1+2+3+4+5+6+7+8+9+10, or 55. So, your revenue for the first year will be $55,000.\\ \\
  - $55,000 is 5.5 (or 4.6) times larger than what many first-time users expect, i.e., $10,000 (or $12,000).


{{keywords>predicting revenue, bottom-up, customer acquisition cost, average order size, revenue}}