1. 1

2.  Types of Revenue
 Estimating Feature / Product Revenue
 What is the value of Money ?
 Financial Measures
2

3.  New Revenue
› New client
 Incremental Revenue
› Extra Fees From Current Clients
 Retained Revenue
› Cut Losses
 Operational Efficiencies
› Save Time and efforts
3

4. 4
Quarter Development
Cost
New
Revenue
Incremental
Revenue
Retained
Revenue
Operational
Efficiency
Net Cash
Flow
1 -8000 0 0 0 0 -8000
2 -4000 500 500 500 500 -2000
3 1000 1000 1000 500 3500
4
5
6
7
8
We Want to reach That

5. * Required 5
Quarter New Customers Revenue Per Customer
(Average)
New Revenue
1
2 50 75 3750
3 50 75 3750
4 50 75 3750
5 100 75 7500
6 100 75 7500
7 100 75 7500
8 100 75 7500

6. * Required 6
Quarter Current Customers Revenue Per Customer
(Average)
Incremental
Revenue
1
2 100 25 2500
3 200 25 5000
4 300 25 7500
5 400 25 10000
6 400 25 10000
7 400 25 10000
8 400 25 10000

7. * Required 7
Quarter Retained Customers Revenue Per Customer
(Average)
Retained Revenue
1 20 100 2000
2 20 100 2000
3 20 100 2000
4 20 100 2000
5 40 100 4000
6 40 100 4000
7 40 100 4000
8 40 100 4000

8. * Required 8
Quarter Employees Need to do
manual work
Salary per
Employee
Operational
Efficiency
1 0 0 0
2 0 0 0
3 1 1000 1000
4 1 1000 1000
5 1 1000 1000
6 2 1000 2000
7 2 1000 2000
8 2 1000 2000

9.  If i pay 50 today and earn 100 after one
month, did I make profit ?
 If i pay 50 today and earn 100 after one
year, did I make profit ?
 If i pay 50 today and earn 100 after ten
year, did I make profit ?
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10. Should always take into consideration
Opportunity Cost
This can be
 Interest rate
 Apartment Rental
 Even your Time has a cost
10

11.  Net Present Value
 Internal Rate of Return
 Payback Period
 Discounted Payback Period
11

12. * Required 12
End Of Period Net Cash Flow Present Value Factor (12%) Present Value
1 -85750 0.97 = 1/1.03 -85750
2 -14150 0.94 = 1/1.03^2 -13338
3 18250 0.91 = 1/1.03^3 16701
4
5
6
7
8
Net
46341

13.  Pros
› Easy to calculate
 Cons
› Can be misleading (Value and not percentage)
› Two projects with the same NPV 100,000. One
require big initial investment while the other
require less initial investment at the beginning
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14. I Want to know what is the interest rate of investing in
this project as if i am investing my money in a bank
So what it i* ? , the interest rate that will make the
present value of the money spent equal to zero
Equation => Σ ( V * (1 + i) ^ -t) = 0
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15.  Pros
› No need to have get organization Interest Rate
› Some companies has its own MARR (minimum attractive
rate of return)
 Cons
› difficult to calculate
› Can be misleading
 If a project with 45% IRR but its value is small and it requires
tying up a critical developer resource
 While another with 25% IRR value is big and it requires tying
up the same critical developer resource
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16. * Required 16
Quarter Net Cash Flow at End of quarter Running Total
1 -10000 -10000
2 -5000 -15000
3 12000 -3000
4 12000 9000
5 X X
6 X X
7 X X
8 X X

17.  Pros
› Calculations are easy
› Risk Period
 Cons
› Doesn't Take into consideration Value of the
money
› What is the profitability of the project ?
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18. * Required 18
Quarter Net Cash Flow Present Value
Factor
Discounted
Cash Flow
Running Total
1 -85750 0.971 -83252 -83252
2 -14150 0.943 -13338 <0
3 <0
4 <0
5 >0
6 >0
7 >0
8 >0

19.  Same as Payback period method, it just
takes into consideration the value of the
money
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20. First Project : have bigged NPV but risky (7 quarters)
Third Project : has the biggest ROI (IRR) with least risk but lowest NPV
Second Project has teh lowest ROI but can be combined with the Third
project so investment is almost same as the first project while risk and
ROI is moderate.
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21.  Make sure to remember the following
Opportunity Cost
 Types of Revenues
› New Revenue
› Incremental Revenue
› Retained Revenue
› Operational Efficiencies
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