The Revenue Formula
The Fundamental Equation of Predictable Growth
From Revenue Architecture by Jacco van der Kooij
The Revenue Formula is the foundation of predictable, scalable growth. It breaks down revenue into its core components, showing exactly where to focus optimization efforts. Master this formula and you can forecast, model, and scale with precision.
The Core Formula
Leads
Number of qualified opportunities entering your pipeline
Conversion Rate
Percentage of leads that become paying customers
ACV
Average Contract Value per customer
Example in Action
SaaS Company Example:
Impact of 10% Improvement:
The Power of Compounding
Here's where it gets interesting: improvements compound multiplicatively, not additively.
Scenario: 10% improvement in each lever
Why this matters:
- • 10% + 10% + 10% ≠ 30%
- • 1.1 × 1.1 × 1.1 = 1.33 (33% increase)
- • Small improvements compound dramatically
- • Focus on all three levers simultaneously
How to Optimize Each Lever
1 Increase Lead Volume
Marketing Tactics:
- • Scale paid advertising (if CAC allows)
- • Invest in content and SEO
- • Run more events/webinars
- • Build partnerships
Quality Focus:
- • Don't sacrifice quality for quantity
- • Improve lead scoring
- • Target ideal customer profile (ICP)
- • Monitor MQL → SQL conversion
2 Improve Conversion Rate
Sales Process:
- • Better qualification (use SPICED)
- • Improve sales training
- • Optimize demo/pitch
- • Reduce friction in buying process
Enablement:
- • Create better collateral
- • Build case studies/social proof
- • Implement sales playbooks
- • Track and coach win rate
3 Increase Average Contract Value
Pricing Strategy:
- • Review and optimize pricing
- • Create premium tiers
- • Annual vs monthly contracts
- • Value-based pricing
Sales Tactics:
- • Upsell during initial sale
- • Bundle products/features
- • Target larger accounts
- • Multi-year agreements
Model Your Revenue Formula
Use these calculators to optimize each component: