What are bottom-up techniques for revenue prediction? What are bottom-up sales models?

Bottom-up techniques solve the problems of WAGs and top-down techniques. They require you to understand how you will actually capture and retain customers. They ask you to estimate costs associated with attracting leads and converting leads through a marketing and sales funnel into actual paying customers. The key drivers of most bottom-up techniques are marketing and sales expense, initial capture rate (dollars to lead), conversion rate (lead to customer), and average revenue per customer (customer to revenue). Every successful company eventually needs to understand this process (called a repeatable sales model) in detail. Wise entrepreneurs estimate these key drivers of the business at planning time and then refine as they learn. By estimating them at planning time and understanding their relationship to financial outcomes, entrepreneurs can determine whether the business is worthwhile to pursue (i.e., are the drivers achievable), and what experiments to conduct early (i.e., to verify the drivers).

Related Questions:

What are top-down techniques?

What are wild ass guesses (WAGs)?


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