Walk me through how you create a revenue model for a company.

There are 2 ways you could do this: a bottoms-up build and a tops-down build.

• Bottoms-Up: Start with individual products/customers, estimate the average sale value or customer value, and then the growth rate in sales and sale values to tie everything together.

• Tops-Down: Start with “big-picture” metrics like overall market size, then estimate the company’s market share and how that will change in coming years, and multiply to get to their revenue. 

Of these two methods, bottoms-up is more common and is taken more seriously because estimating “big-picture” numbers is almost impossible.