Forecasting average revenue helps finance leaders understand how value flows through the business. With the right data and tools in place, it becomes a powerful way to spot trends, guide strategy, and drive long-term planning decisions.
When finance leaders talk about revenue growth, they’re not just focused on topline numbers. They’re thinking about how dependable that growth is, what’s driving it, and whether it can scale. One of the clearest ways to evaluate and forecast these dynamics is through average revenue—how much value each customer, account, or unit generates, and how that might change over a period of time.
Average revenue plays a critical role in shaping pricing strategies, understanding customer behavior, and guiding long-term financial planning. When paired with forecasting methods, it becomes a forward-looking tool that helps teams anticipate shifts in customer lifetime value, segment performance, and overall revenue health.
Understanding how to calculate and forecast average revenue gives finance teams a practical edge, helping them link performance data to strategy, improve planning accuracy, and build stronger alignment across the business.
Average revenue plays a critical role in shaping pricing strategies, understanding customer behavior, and guiding long-term planning.
Average revenue shows how much money your business brings in per customer, account, or unit sold. It’s a simple metric with big implications—especially for finance teams that need to assess profitability, refine pricing strategies, or understand how cash flow fluctuates over time.
Depending on your business model, average revenue may take different forms:
Used effectively, average revenue tells a story about business health. Tracking it over time can uncover valuable insights like the effectiveness of pricing and packaging strategies and the performance of different customer segments. It can also point to new opportunities for upselling or cross-selling.
When combined with metrics like customer retention or cost to serve, average revenue becomes even more powerful. It helps finance teams understand not just how much customers are spending, but how profitable and sustainable that revenue truly is. This level of insight supports more strategic decisions around resource allocation, product development, and long-term planning.
The formula for average revenue is simple:
Average Revenue = Total Revenue / Number of Units Sold (or Users, Accounts, etc.)
What that “unit” refers to depends on your business. It may be users, accounts, customers, or products, but no matter what, the formula helps you understand how much value each unit generates over a given period. For example: Let’s say your company earned $500,000 last quarter from 2,500 customers. Your average revenue per customer would be:
$500,000 ÷ 2,500 = $200
This number becomes far more valuable when monitored over time. Rising average revenue might suggest successful upselling, pricing improvements, or deepened customer engagement. A decline, on the other hand, could point to discounts, customer churn, or reduced usage—all factors that deserve further investigation.
Average revenue measures the total revenue per “unit” sold—which may be users, accounts, customers, or products.
Average revenue delivers the most value when it’s used to anticipate what comes next. Forecasting average revenue transforms it from a static metric into a forward-looking insight—giving finance leaders the ability to spot trends, test assumptions, and guide strategy with greater confidence.
Instead of simply reflecting what customers spent last quarter, it becomes a way to project revenue based on pricing shifts, customer mix, or expansion efforts. And rather than relying solely on volume or broad revenue targets, an accurate revenue forecast enables more nuanced planning. Average revenue projections help:
By anchoring forecasts in average revenue trends, organizations gain a deeper understanding of where their growth is coming from and where it could stall. This level of insight helps finance leaders make smarter bets on future investments, allocate resources more effectively, and steer the business toward long-term resilience and value creation.
Forecasting average revenue requires both the right method and a clear understanding of your business model. Each approach brings a different lens to revenue trends, whether you’re operating in a mature market or scaling quickly in a dynamic one. Below are four commonly used forecasting methods, along with examples to illustrate how each one works in practice.
1. Straight-Line Method
The straight-line method assumes revenue will grow at a consistent rate over time. It’s best used when historical trends are steady and external conditions are relatively stable.
Formula: Future Average Revenue = Current Average Revenue × (1 + Growth Rate)
Example: If your current average revenue per customer is $200 and you’ve seen a consistent 5% growth rate quarter over quarter, your projected average revenue next quarter would be: $200 × (1 + 0.05) = $210
2. Moving Average
The moving average method calculates the average revenue across a set number of past periods to smooth out fluctuations and highlight broader trends. It’s useful for spotting seasonality and damping short-term volatility.
Formula: Moving Average = (Revenue in Period 1 + Period 2 + ... + Period N) / N
Example: If average revenue was $190, $200, and $210 over the past three quarters, the moving average forecast would be: ($190 + $200 + $210) / 3 = $200
Linear regression uses historical data to model the relationship between time and revenue. It’s a good choice when you want to quantify the direction and rate of change.
Formula: Y = a + bX, where Y = forecasted average revenue, X = time period, a = intercept, b = slope
Example: Let’s say your regression analysis shows that average revenue increases by $15 per quarter starting from $170. For Q4 (X=4): Y = 170 + 15×4 = $230
Scenario planning models multiple possible outcomes—best-case, base-case, and worst-case—based on a mix of internal assumptions and external variables. This method is especially valuable in uncertain or high-growth environments.
Example: Imagine you're building a forecast for average revenue per customer. Your base-case projection is $210, assuming current trends hold steady. If retention improves and customers adopt higher-value plans, your best-case scenario could reach $230. On the other hand, if churn rises or discounting increases, your worst-case forecast might fall to $190.
These ranges help prepare for variability in performance and support more resilient planning.Each scenario helps teams understand risks and opportunities, enabling more flexible and informed decisions.
Also consider factors such as churn rate, new pricing models, customer segmentation, and market changes. The most effective forecasts combine historical data points with forward-looking strategy to capture the full picture of revenue potential.
Organizations that embrace dynamic planning methods on a unified software platform outperform those still using traditional methods.
Reliable average revenue forecasts are built on practices that combine quality data, aligned teams, and intelligent technology like AI to surface smarter insights. Here are the best practices to ensure you predict future revenue accurately:
Use connected data: Integrate finance, sales, and operational data in real time to eliminate silos and improve accuracy.
Account for external patterns: Incorporate seasonality, industry shifts, and broader economic signals to ground your forecasts in context.
Align cross-functional inputs: Collaborate across finance, sales, and operations to align on the assumptions and scenarios that drive revenue.
Link to performance metrics: Track average revenue alongside key performance indicators (KPIs) like market share, customer acquisition cost, and upsell rate for a more complete view of performance.
Apply AI to accelerate insights: Modern finance teams are leaning into AI and machine learning to forecast revenue with greater speed and precision.
To execute these best practices consistently, finance teams need systems that bring together data, insights, and modeling capabilities in one place. Purpose-built tools help teams move from reactive analysis to forward-looking planning, giving them the ability to adjust quickly, test assumptions, and stay aligned when conditions change.
This is one place where the gap between forward-thinking finance leaders and laggards is already showing. Workday research found that those embracing dynamic forecasting and planning outperform those stuck on traditional processes, yet 40% still feel overwhelmed by their data and 70% are relying on spreadsheets to make revenue (and other) forecasts.
To implement the above best practices and get a strong handle on both current and future revenue generation, adopting a unified planning platform is the most essential next step.
Accurate forecasting doesn’t just rely on solid methodology and smart practices. Financial planning and analysis (FP&A) software plays a vital role in the process by unifying data across the organization, enabling real-time collaboration, and streamlining the way forecasts are created, tested, and updated.
Modern FP&A platforms help finance teams go beyond reactive number-crunching. With capabilities like automated data refreshes, integrated scenario modeling, and AI-driven trend analysis, they make it easier to see what’s coming and adjust quickly when plans shift.
The result? Planning that’s faster to adapt, easier to align across teams, and more responsive to real-world changes.
Why are finance leaders choosing Workday? Learn more in our report about the five major factors motivating CFOs to move to Workday.
More Reading
From spend analysis to faster close cycles, AI is helping finance leaders find new efficiencies, reduce risk, and reallocate resources for strategic growth. Learn the major benefits that your business could gain from AI.
Overhead costs influence more than just the bottom line—they reveal how well your business runs. With the right structure and insights, finance teams can turn these expenses into a source of control, clarity, and smarter decisions.
Retained earnings reflect the share of net profits a company retains to fuel growth and sustain operations. Mastering their calculation and forecasting empowers finance teams to harness internal capital to its fullest potential.