Intro.
#Top-Down vs. Bottom-Up — Why Bottom-Up Wins
| Approach | Description | Credibility |
|---|
| Top-down | “X% of a ₩___T market → ₩___” | Low — the formula can't be verified |
| Bottom-up | Customer count × price × conversion rate → ₩___ | High — each assumption can be checked |
Top-down relies on the vague assumption that “it's a big market, so we'll capture some of it.” A reviewer immediately asks where that “X%” came from — and if there's no answer, trust collapses. Bottom-up is the opposite: because it breaks out each assumption individually, a reviewer can check the math, and numbers that can be checked earn trust.
주의
If you present revenue using only a top-down approach, reviewers immediately grow suspicious of the second S (growth strategy) in P-S-S-T. Include at least one line with a bottom-up formula.
02
#4 Formulas by Business Model
| Model | Formula | Core assumptions |
|---|
| Subscription (SaaS) | Active users × monthly ARPU × 12 × retention rate | Monthly churn / ARPU / activation rate |
| Transaction (commerce, booking) | Number of transactions × average transaction value × take rate | Transaction frequency / average price / fee rate |
| Advertising (content, media) | MAU × impressions per MAU × CPM × 1/1000 | Time on site / fill rate / CPM rate |
| B2B (licensing, contracts) | Number of contracts × average contract value × renewal rate | Sales cycle / contract value / churn |
For hybrid models (e.g., SaaS plus transaction fees), combine both formulas. Don't cram every assumption into one formula — the standard approach is to present each model separately.
03
#Assumptions, Step by Step — Customers, Price, Conversion, Retention
| Assumption | Definition | Credible source |
|---|
| Customer count | Active customers reachable within 1–3 years | Industry benchmarks + marketing funnel estimate |
| Price | Average payment per person or per transaction | Competitor pricing + your own prior interviews |
| Conversion rate | Interest → purchase ratio | Industry average (B2B 1–3% / B2C 5–10%) |
| Retention rate | Monthly or annual retention | Industry benchmark + your own beta data |
TIP
Cite a source for every assumption. If your assumptions come from a credible source, credibility in the formula's output follows automatically. Never use words like “estimated,” “assumed,” or “expected” without a source attached.
04
#Worked Example 1 — B2B SaaS (Accounting Software)
A B2B SaaS accounting product for Korean SMBs. Let's estimate Year 3 revenue bottom-up.
| Assumption | Value | Source |
|---|
| Target SMB count | 320,000 (₩500M–₩5B revenue range) | Statistics Korea, KOSIS 2025 |
| 3-year penetration rate | 1.2% (conservative for Early Adopters) | Average penetration for comparable SaaS |
| Monthly ARPU | ₩110K | Average competitor pricing + interviews |
| Monthly churn rate | 2.5% | Korean B2B SaaS average |
Formula: 320,000 × 1.2% × ₩110K × 12 months × (1 − 2.5%×12) ≈ ₩3.1B. This is presented as “Year 3 revenue: ₩3.1B,” and a reviewer can check the math on each of the four assumptions. The question “is a 1.2% penetration rate too low or too high?” is still fair game — but at minimum, the formula itself has earned credibility.
05
#Worked Example 2 — D2C Premium Food
A D2C premium food subscription. Estimating Year 2 revenue.
| Assumption | Value | Source |
|---|
| Target segment | 920,000 single working women in greater Seoul | KOSIS 2025 |
| 2-year awareness rate | 2% | Marketing budget + reverse-engineered CAC |
| Awareness → purchase conversion | 8% | D2C food industry average |
| Monthly ARPU | ₩45K | Average subscription price |
| Monthly churn rate | 6% | D2C food industry average |
Formula: 920,000 × 2% × 8% × ₩45K × 12 months × (1 − 6%×12) ≈ roughly ₩300M. It looks small, but as a “Year 2 revenue” figure, it's conservative and credible. A small, checkable number carries more weight in a business plan than a big, unverifiable one.
06
#Validating Assumptions — Source, Scope, Timeframe
- State your source — prioritize credible institutions like Statistics Korea, KOSIS, industry research institutes, Statista, or Gartner
- State your scope — define the boundaries clearly, e.g., “320,000 domestic SMBs (₩500M–₩5B revenue)”
- State your timeframe — note the reference point, e.g., “as of 2025”
- Run a sensitivity analysis — show, in a table, how revenue changes with a ±20% swing in your key assumptions
- Benchmark — compare against the actual revenue of comparable companies at a similar stage
주의
Attaching a sensitivity analysis preempts a reviewer's doubts. For a “1.2% penetration rate” assumption, present a table showing revenue at 0.6% / 1.2% / 2.4%.
07
#Presenting It in Your Business Plan — Formula, Table, and Sensitivity, as a Set
Bottom-up revenue is most credible when presented as a set of three: one formula line, an assumptions table, and a sensitivity table.
- One formula line — “Year N revenue = customer count × price × conversion rate × ...”
- Assumptions table — the value, source, and range for each variable (4–6 rows)
- Sensitivity table — how revenue shifts with a ±20% swing in 1–2 key assumptions
This three-part set fits on a single page. But the impact is significant — it lets a reviewer check your revenue estimate's math in 30 seconds, automatically creating the impression that it's well-founded.
Summary.
#Revenue Estimate Self-Diagnosis Checklist
- Did you include at least one bottom-up formula line, rather than relying only on top-down (“X% of a ₩___T market”)?
- Did you cite a source for every variable in the formula?
- Do the variable values fall within industry benchmark ranges?
- Does your target segment match the definition in your P section?
- Did you attach a sensitivity analysis (±20%) as a table?
- Do Year 1, 3, and 5 revenue figures progress in stages with a reasonable growth rate?
- Do units, currency, and timeframe match across every table?
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