Maxwell Consulting

Financing for Startups

Revenue Model

The Revenue Model starts by defining the basic unit of sale, which might be a single product sale, a long-term project, a subscription, a service transaction, or a customer relationship.  Whatever the unit is, the Revenue Model defines the economics of a single unit of sale, and then builds revenues by generating multiple transactions across all product and service lines.  Revenues are generated by definable inputs, such as the number of salespeople hired times the average productivity per salesperson, or the number of retail outlets carrying the product times the average units sold per outlet. 

This granular bottom-up approach builds real credibility for your projections.  It transforms objections from investors along the lines of "We don't think your revenue ramp is achievable" into conversations such as "OK, hiring one salesperson a month doesn't seem unreasonable" and "Your projected revenue per salesperson is about industry average, and we like the way you don't show any sales for the first six months after a new sales hire".

Here is a section from a typical Revenue Model:


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