The product-led model has changed the way the SaaS world works. Instead of relying on a sales team to close deals, a great product speaks for itself. But when most signups happen without a sales touch, how do you forecast monthly revenue?

Before we dive in, let’s be clear. This is not a long-term projection for an investor deck. This is a monthly forecast. We want to answer a simple question: What net new monthly recurring revenue (MRR) will you get?

Revenue forecasting in a sales-led world

In a traditional sales-led model, deals are logged in a CRM. Salespeople update the stages and chase the deals. A sales manager multiplies the deal size by how likely it is to close. Simple math gives a rough idea of the month’s revenue.

How the product-led growth model is different

With product-led growth, you have many trial signups with little human interaction. There isn’t anyone to judge each trial’s warmth. Most conversions happen on their own. This makes forecasting a bit trickier since you lose the personal touch.

So how do you go from trial signups to a monthly net new MRR forecast? There are two ways to look at it.

Two approaches to get a net new MRR forecast for the month

The top-down approach

If your business has run for a while, you likely know the average conversion rate from trial to paid. For example, suppose your trials have converted at around 10% over recent months. With simple math you can estimate the month’s net new MRR like this:

Conversion rate × Number of trials × Average revenue per customer = Net new MRR

This method is easy but not very precise. Averages hide the ups and downs. Marketing pushes may bring in many signups that don’t convert well. That means the forecast could be off.

The bottom-up approach

This method is similar to the classic sales-led style. Instead of relying on CRM deal stages, you look at each trial. You assess how far along a user is in discovering your product’s value. In a sales-led model, a demo request might have a 20% chance to close while a pricing discussion could show 50% or more. With product-led growth, you need a new indicator: Activation rate.

What is Activation Rate?

Activation is a simple measure of how far a user has come in learning about your product. It tells you how close they are to reaching that “aha” moment when your product really works for them. For example, if a user finishes 2 out of 5 key steps, they are 40% activated. The higher the activation, the greater the chance they will convert to a paying customer.

A business might observe that users who reach a 50% activation rate convert 70% to 80% of the time. Those who reach only 25% to 50% convert about 20% of the time. If a user does even less, conversion is unlikely.

By examining the historical link between activation and conversion, you can build a revenue forecast. Instead of relying on a salesperson’s gut feeling, you use real user data.

Why product-led revenue forecasting can be more accurate

It might seem surprising, but basing your forecast on user activation data can be more reliable than the old sales-led method. You are basing your prediction on what users have already done rather than what a salesperson estimates they will do. With the right system, you get a more realistic view of your monthly net new MRR.