Revenue through the transition
- Year 1 GBP 18,162,500 · Year 2 GBP 16,325,000 · Year 3 GBP 14,487,500 · Deepest dip -GBP 5,512,500.
Executive Intelligence · Advanced Executive Intelligence
Business Model Innovation Advisor
Structured exploration of alternative models against recorded unit economics.
Demonstration: Dunmore Software Services (fictional) · Software. Fictional data and a scripted answer.
The situation
- Organisation
- Dunmore Software Services (fictional)
- Who is asking
- Chief executive
- Industry
- Software
- What happened
- The company sells perpetual licences and is considering moving to subscriptions, which would cut revenue in the first years before it grows.
The question asked
If we move customers to subscription, how deep is the revenue dip and when do we recover?
What it reads, and who can see the result
- Revenue by product and licence type exportCurrent licence revenue.
- Pilot subscription pricing documentPrice points tested.
- Reads
- Aggregated revenue and pilot results.
- Does not read
- Individual contracts.
- Permission
- Finance and product access.
- Who sees it
- The CEO, the CFO and the board.
Try it
Change the assumptions. Every result and the answer below are recomputed from them, and a warning appears when a result crosses a stated limit.
- Revenue in year one
- GBP 18,162,500Today 20,000,000 a year.
- Revenue in year two
- GBP 16,325,000
- Revenue in year three
- GBP 14,487,500
- Lowest year against today
- -GBP 5,512,500
The revenue dip exceeds 3,000,000, which the board said the company's covenants and cash could not absorb.
The answer
Simulated answer. Written for this fictional case, not produced by a live model. Only the figures in it are computed, from what you decided above.
Moving 25% of customers a year gives GBP 18,162,500 in year one, then GBP 16,325,000 and GBP 14,487,500; the deepest dip is -GBP 5,512,500.
Each customer who moves pays a smaller price now and more over time [S1][S2]. The dip is the cost of the transition, and it is set mainly by how fast customers move and what they pay: the pilot's 55% price is the figure to test.
The model assumes customers move at a steady pace; in practice they cluster at renewal dates. The board's question is whether the company can fund the dip, and the covenant and cash headroom answer it, not the model.
Relies on: S1 · Licence revenue, last yearS2 · Subscription pilot results
No approval is needed for this result: it is read-only insight, and nothing consequential happens because of it.
What it produces
Limits of this example
- Ignores costs, churn changes and new customers.
- A steady pace of migration.
- This is a scripted demonstration on fictional data. No model was called and no real organisation, person or result is shown.
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