Lessem’s Rule of 10

When running Firmex I was always calculating ways to predict the future.  Here is one I came up with which I call Lessem’s Rule of 10  since I have never heard about it from anyone else.

Lessem’s Rule of 10:  Sequential change in quarterly recurring revenue x 10 = annual change in revenue

Adding $100k in new revenue in a quarter may not seem like a lot.  However, if you do that every quarter your annual revenue change will be $1m.   This is the effect of compounding.   See the  illustration below: (100+200+300+400 = $1m gain)

Next time you look at a public SaaS company – don’t look at their sales growth form PY.  That is trailing and not a good forecast of future results.   For a trend look at the quarterly revenue change and x 10!