Streams, pricing mechanic, LTV, sales cycle, expansion levers. Compose them: streams × pricing × frequency × retention.
Layout
Revenue Model
5 blocks · 2-row grid
"Revenue is a multiplication. List the factors, then defend each one."
What it is
Five tightly chained blocks. Revenue Streams names the primary and secondary income lines. Pricing Mechanic states how customers pay. Customer LTV grounds the model in retention. Sales Cycle dates it. Expansion Levers compound the LTV.
Origin
Revenue-model thinking matured alongside SaaS unit economics: founders who could only describe "we charge for the product" lost rounds to founders who could compose pricing, frequency, retention, and expansion into a multiplicative model. The five-block shape is the cleanest expression of that composition.
When to reach for it
You're documenting the model for the first time and want it to compose, not just list.
You're evaluating a new pricing mechanic and want to write the alternative model first.
You're briefing a CFO hire who needs the multiplication to make sense in one read.
The blocks
Worked example uses Shopify (early SMB era).
What good looks like
Primary stream first with % share. Secondary streams and rationale. Streams ruled out.
Example — Shopify (early SMB era)
Primary: subscription fees from merchants (~58% of revenue). Secondary: Shopify Payments take rate (~38%). Tertiary: app store, themes (~4%).
What good looks like
Subscription / per-seat / usage / transactional. Billing frequency. Why this mechanic for this customer.
Example — Shopify (early SMB era)
Tiered monthly subscription ($29 / $79 / $299) + transactional Payments take rate (decreases with plan tier). Per-store metering, billed monthly.
What good looks like
Stated formula, retention assumption, gross margin used, time horizon, expansion inclusion.
Example — Shopify (early SMB era)
LTV = (ARPU $58/mo × gross margin 55%) × 36 mo expected retention = $1,148. Excludes Payments uplift to stay conservative; full LTV ≈ $1,800.
What good looks like
Named stages, median cycle length, conversion at each stage, owner per stage.
Example — Shopify (early SMB era)
Self-serve, no salesperson. Trial → first store created → first sale → first paid invoice. Median trial-to-paid: 17 days; conversion 28% at the time.
What good looks like
Primary lever, NRR target, trigger for expansion, friction reducers.
Example — Shopify (early SMB era)
Lever: Payments adoption (more stores enable it as they grow). NRR target 110%+. Friction reducers: in-product Payments prompt at first sale, tier-upgrade prompt at $5k MRR per store.
How to use it
Name the primary stream. Anything more than two streams at sub-$10M ARR is wishful.
Pick the pricing mechanic that scales the cleanest. Per-seat is the default; usage is usually better.
LTV is gross margin × ARPU × expected retention horizon. Don't compute it on 5y retention with 9mo of data.
Expansion lever should be a product property, not a sales motion.
Common mistakes
Listing five revenue streams when one carries 90% of revenue. Focus is the model.
LTV computed with retention horizons you haven't lived through yet.
Per-seat pricing chosen by default in a usage-shaped business.
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