All related (8)
Puja Hait
Product Leader, GoogleSeptember 13

Start with a Total addressable market (TAM) * share of TAM you can get in next 3-5 years *confidence level *Revenue per user per year * 3-5 years.

In the RICE framework, you would divide TAM * Share of TAM (influence) * Confience/ Effort to then help prioritize. (Desc)

Calculating Share of TAM you can get in next 3-5 years is a art more than science. Do a SWOT analysis for yourself, incumbents in the market, if any and emerging players. Also keep in mind that market/users may not always be ready to adopt. So factor in the barrier to adoption/switching costs.

Confidence level is based on your ablity to execute and deliver results- ship great products, great customer support, sales channels, marketing (even if lo-budget). Do you have the right team to get this done? Is the technology there yet? Are there high risk dependencies?

Brandon Green
Director of Product, Fulfillment, ezCater | Formerly Wayfair, Abstract, CustomMade, SonicbidsMarch 9

So, in my experience of building 0-to-1, I've never had to do this before exploring a potential new product 😅 and candidly, I really don't like doing it because any projections are in my experience educated guesses based on inherently flawed source data - historical data that may not apply anymore, all sorts of biases, differences between other products and your new product, etc. What I try to do instead of offering revenue projections is work with my leadership/stakeholders/et al to understand that the primary initial goal of shipping the MVP is to learn and validate. We can use other metrics to understand whether the product is viable (eg. repeat usage, engagement, etc. depending on the product's value proposition) and, in parallel, start to gauge what potential users are willing to pay for said product. Those two things together will help inform possible revenue projections.

Deepti Srivastava
Head of Product, VP, December 13

When setting up any new line of business, revenue projection is an important step to understand the expected outcomes and viability of the business. For new a new product, you should have:

  • The basic market analysis including market sizing and TAM (total addressable market)
  • Competitor growth rates and revenue acquisition at comparable stages of growth
  • The market segment you are positioning the product in, and its current and projected growth rate
  • Revenue and monetization strategy for your new product, including pricing, expected paid user acquisition and retention rates (based on initial product/market testing)

You can use these inputs to create an initial revenue projection model. You can do a best-guess estimate for rates where there is little data available. You can always tweak these models as data starts coming in post-launch.

I recommend creating three projections – expected or target growth, above target growth, and below target. This will help you get a basic floor and ceiling or bounding box of your revenue in the first year.