The easiest way to use the Subscription Growth Calculator (SGC) is to only change the fields in the white boxes on the left of the spreadsheet. We have left everything unlocked so you can see and change anything you’d like, but only changing the cells on the left provides fantastic insight.
The cells in gray on the left provide a summary of the annual revenue and the percent of growth for that year that came from Net Dollar Retention (NDR). In other words, how much do you need to focus on expansion?
Start by entering a few initial assumptions:
These three assumptions simply start the model. It is best to be as close to possible with your actual numbers.
Once you have the initial assumptions, now you get to play with the future. The four columns below the initial assumptions give you control over the future (in the model, not real life).
These are the four key manipulations you get to make:
Pro Tip: The calculator lets you see and edit every cell, but it works best when you only change the fields in the leftmost section.
If you dig into the details, you will find the spreadsheet calculates monthly, but uses annual cohorts. Every customer as of Dec 31 is in the cohort for the following year. Some customers will churn out, while some will buy more (expand).
At the end of the year, you can see the Net Dollar Retention (NDR) rate. This is how much you sold through the year relative to if the cohort had zero churn and expansion.
Did you know that in their S-1 filing for going public, Zoom reported a 140% NDR?
The purpose of the SGC is to give you a tool to play with acquisition, churn, and expansion rates to determine how you can best and realistically get to your long term goal. OK, we really put it together to help you realize you can’t get where you want to go without expansion, probably lots of it. If your NDR is above 100%, you need to implement strategies and tactics targeting expansion.
Pricing is hard and important in both acquisition and retention, but it becomes especially crucial and challenging once you decide to focus on expansion. You may need to segment your market and raise prices on the high-value segments. You’ll definitely want to get your pricing metric right so that as the customer gets more value they pay more. Finally, you will want to offer different packages at different prices. Good, better, best is a powerful strategy to capture more of the value you deliver to each customer.
Managing expansion is not trivial, and pricing is tightly interwoven into most of those expansion decisions. If you’d like to learn how to use expansion to grow your company, consider taking our Subscription Value and Pricing course.
Try the valuable calculator that will allow you to input your data to see how your company can grow over the next five years.