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--- using-offtoa:assumptions:revenue-assumptions:sales-model:bottom-up:use-marketing-and-sales-to-drive-new-customer-acquisition [2016/05/28 14:42]
mdavis
+++ using-offtoa:assumptions:revenue-assumptions:sales-model:bottom-up:use-marketing-and-sales-to-drive-new-customer-acquisition [2016/09/19 13:01] (current)
@@ Line 36: / Line 36: @@
   - Expense Item or Employee Type: Increasing (decreasing) dollars allocated to this expense item (on the Assumptions/Costs/Other Expenses screen) or the salary for this employee type (on the Assumptions/Costs/Personnel/Employees) will increase (decrease) units sold, number of customers, and revenues on the income statement.\\ \\
-  - Customer Acquisition Cost (CAC): Increasing (decreasing) this will decrease (increase) units sold, number of customers, and revenues on the income statement.\\ \\
+  - Customer Acquisition Cost (CAC): Increasing (decreasing) CAC will decrease (increase) units sold, number of customers, and revenues on the income statement.\\ \\
-  - Sales Cycle: Increasing (decreasing) this will decrease (increase) units sold, number of customers, and revenues on the income statement //for the first year only.//\\ \\
+  - Sales Cycle: Increasing (decreasing) Sales Cycle will decrease (increase) units sold, number of customers, and revenues on the income statement //for the first year only.//\\ \\
-  - Average Order Size (AOS): Increasing (decreasing) this will increase (decrease) units sold and revenues on the income statement, but will not affect number of customers.\\ \\
+  - Average Order Size (AOS): Increasing (decreasing) AOS will increase (decrease) units sold and revenues on the income statement, but will not affect number of customers.\\ \\
-  - Periodicity: Extending, e.g., from monthly to quarterly (shrinking, e.g., from quarterly to monthly) this will decrease (increase) units sold and revenues, but will not affect numbers of customers.\\ \\
+  - Periodicity: Extending, e.g., from monthly to quarterly (shrinking, e.g., from quarterly to monthly) periodicity will decrease (increase) units sold and revenues, but will not affect numbers of customers.\\ \\
-  - Retention Rate: Increasing (decreasing) this will increase (decrease) units sold, number of customers, and revenues on the income statement.\\ \\
+  - Retention Rate: Increasing (decreasing) Retention Rate will increase (decrease) units sold, number of customers, and revenues on the income statement.\\ \\
-  - Viral Coefficient: Increasing (decreasing) this will increase (decrease) units sold, number of customers, and revenues on the income statement (//usually quite dramatically//!).\\ \\
+  - Viral Coefficient: Increasing (decreasing) Viral Coefficient will increase (decrease) units sold, number of customers, and revenues on the income statement (//usually quite dramatically//!).\\ \\
-  - Viral Cycle Length: Increasing (decreasing) this will decrease (increase) units sold, number of customers, and revenues on the income statement (//usually quite dramatically//!).
+  - Viral Cycle Length: Increasing (decreasing) Viral Cycle Length will decrease (increase) units sold, number of customers, and revenues on the income statement (//usually quite dramatically//!).
 **How can I achieve other effects on the income statement?**
@@ Line 54: / Line 54: @@
   - You want to increase (decrease) revenues and number of customers but keep units sold unchanged: On the current screen change any of the values that increase (decrease) numbers of customers to the level you want. Next manipulate Average Order Size on the current screen until the revenues achieve desired values. Finally increase (decrease) the price per item on the Assumptions/Revenue/Pricing screen until the units sold reach their desired values.\\ \\
   - You want to increase (decrease) units sold and revenues but keep number of customers unchanged: Increase (decrease) Average Order Size or shrink (extend) periodicity on the current screen until revenues achieve desired values. Then manipulate the price per item on the Assumptions/Revenue/Pricing screen until the units sold reach their desired values.
-**Why are my revenues 12 times higher than what I think they should be?**
-The average order size that you entered is //per month//, not //per year//.
-**Why are my revenues 6.5 times higher than what I think they should be during the first year?**
-This is the result of a variety of factors combining to create this phenomenon:
-  - First, you are driving sales by either an expense item or a salary item that is being spent in 12 equal increments over the year.\\ \\
-  - Second, you are assuming that sales occur in the same month that the expense occurs (sales cycle=0).\\ \\
-  - 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 month 1, you would acquire 100 customers.\\ \\
-  - In month 2, you would acquire 100 additional customers, bringing your total customers to 200.\\ \\
-  - In each subsequent month 3 through 12, you would acquire 100 additional customers, eventually bringing your total customers to 1200 at the end of the first year.\\ \\
-  - If your average order size (AOS) were, say, $100, you //might //  think you should receive $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 1+2+3+4+5+6+7+8+9+10+11+12, or 78. So, your revenue for the first year will be $78,000.\\ \\
-  - $78,000 is 6.5 times larger than what many first-time users expect, i.e., $12,000.
-**Why are my revenues 6 (or 5.5) times higher than what I think they should be during the first year?**
-This is the result of a variety of factors combining to create this phenomenon:
-  - 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 the month after the expense occurs (sales cycle=1).\\ \\
-  - 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 month 1, you would spend $1,000, but acquire no customers.\\ \\
-  - In month 2, you would acquire 100 customers (from your efforts of the previous month).\\ \\
-  - In month 3, you would acquire 100 additional customers (from your efforts of the previous month), bringing your total customers to 200.\\ \\
-  - In each subsequent month 4 through 12, you would acquire 100 additional customers, eventually bringing your total customers to 1100 at the end of the first year.\\ \\
-  - If your average order size (AOS) were, say, $100, you //might //  think you should receive $11,000 (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+1+2+3+4+5+6+7+8+9+10+11, or 66. So, your revenue for the first year will be $66,000.\\ \\
-  - $66,000 is 6 (or 5.5) times larger than what many first-time users expect, i.e., $11,000 (or $12,000).
-**Why are my revenues 5.5 (or 4.6) times higher than what I think they should be during the first year?**
-This is the result of a variety of factors combining to create this phenomenon:
-  - 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).
 **How can I have customers but no revenues?**
@@ Line 116: / Line 65: @@
 **Other Related Questions:**
-**[[faqs:what-is-sustainable|What is a sustainable growth engine?]]**
+**[[faqs:sales:what-is-sustainable|What is a sustainable growth engine?]]**
-**[[faqs:how-model-paid-growth|How can I model the paid growth engine?]]**
+**[[faqs:sales:how-model-paid-growth|How can I model the paid growth engine?]]**
-**[[faqs:how-model-sticky-growth|How can I model the sticky growth engine?]]**
+**[[faqs:sales:how-model-sticky-growth|How can I model the sticky growth engine?]]**
-**[[faqs:how-model-viral-growth|How can I model the viral growth engine?]]**
+**[[faqs:sales:how-model-viral-growth|How can I model the viral growth engine?]]**
-**[[faqs:cant-find-expense-type|Why can't I find an expense type on the drop down list?]]**
+**[[faqs:sales:cant-find-expense-type|Why can't I find an expense type on the drop down list?]]**
-**[[faqs:how-compute-customers|How does Offtoa compute customers, revenues, number of units sold and revenues by product from my assumptions?]]**
+**[[faqs:customer-report:how-compute-customers|How does Offtoa compute customers, revenues, number of units sold and revenues by product from my assumptions?]]**
+**[[:faqs:commissions:commissions-in-cac|Are commissions used in calculating customer acquisition cost (CAC)?]]**
 **[[http://www.offtoa.com/wp/refining-sales-projection-assumptions-pivoting/|How do I change assumptions when I pivot?]]**
@@ Line 136: / Line 87: @@
 **[[http://www.offtoa.com/wp/driving-revenue-growth-via-viral-strategies/|How can I drive revenue growth via viral strategies?]]**
-**[[faqs:how-AOS-by-year|How do I show a different AOS each year??]]**
+**[[faqs:sales:how-AOS-by-year|How do I show a different AOS each year??]]**
+**[[:faqs:markets:how-to-change-markets|How do I add a market to the sales model?]]**
+**[[:faqs:income-statement:why-revenues-6x|Why are my revenues 5.5 (or 6) times higher than what I think they should be during the first year?]]**
+**[[:faqs:income-statement:why-revenues-55x|Why are my revenues 5.5 (or 4.6) times higher than what I think they should be during the first year?]]**
+**[[:faqs:income-statement:why-revenues-65x|Why are my revenues 6.5 times higher than what I think they should be during the first year?]]**
+**[[:faqs:income-statement:why-revenues-12x|Why are my revenues 12 times higher than what I think they should be?]]**
+**[[:faqs:income-statement:why-revenues-twelfthx|Why are my revenues 92% lower than what I think they should be?]]**
+**[[:faqs:sales:how-change-sales-models|How do I change sales models?]]**
-**[[:faqs:how-to-change-markets|How do I add a market to the sales model?]]**

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