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Software product managers are typically required to develop revenue forecasts for their products. The revenue forecast is a key element of the financial model that’s used for profitability analysis and as a sanity check for the pricing model.
For new products, or when key elements of the product strategy or the market have changed, we cannot build a credible revenue forecast by extrapolating from the past. In these cases, the revenue forecast needs to be built “bottom-up”.
In the “bottom-up”-approach, the revenue forecast is based on planned sales and marketing activities, using assumptions such as success rates of sales people and average deal sizes, as well as conversion rate modeling for web-based sales.