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For decades, SaaS forecasting followed a comfortable formula: count your subscribers, apply your churn rate, factor in expansion, and project forward. Annual recurring revenue became the north star metric, and finance teams built increasingly sophisticated models around its predictable rhythm. But as more companies layer consumption-based pricing alongside (or instead of) traditional subscriptions, those models are breaking down in ways that catch finance leaders off guard.
On Kluster's Next Exit podcast, CFOs who have navigated hybrid revenue models shared why traditional forecasting approaches struggle with consumption complexity, and what it takes to build forecasting capabilities that can handle revenue streams that fluctuate with customer behaviour rather than contract terms.
Meet the experts
1. The Predictability Premium Is Disappearing
Traditional SaaS metrics assume that revenue, once booked, stays booked. Net dollar retention, CAC payback, and lifetime value calculations all depend on the premise that customer contracts create predictable future cash flows. Consumption-based models upend this assumption entirely.
Keith Taylor, CFO of Equinix, explains how his company deliberately structures pricing to preserve predictability: "95% of our revenues recur. And the recurring nature of that is space and power." Even the variable component - energy consumption - is largely fixed. "90% of it is fixed; it's use or lose. We're going to charge you the same rate, whether you use it or not, because we've built out all this infrastructure."
This deliberate choice to charge for allocated capacity rather than actual consumption reflects a deep understanding of what makes forecasting manageable. "Whether you use it or not, we're going to charge you the same rate," Taylor explains. The result: Equinix has missed quarterly guidance only once in over two decades.
But most companies don't have the market position to dictate such favourable terms. They're competing in markets where customers demand to pay only for what they use, and that creates forecasting complexity that traditional models simply cannot handle.
Sun Choi, a consulting CFO specialising in B2B SaaS, describes the metrics that acquirers and investors now scrutinise: "They want to ensure that your net dollar retention is greater than 110%, CAC payback is less than 18 months, gross margin looks good - greater than 70-80%." But these metrics were designed for subscription businesses. When revenue fluctuates with usage, net dollar retention becomes a lagging indicator that obscures rather than illuminates what's actually happening in the customer base.
📌 Takeaway for CFOs: Recognise that consumption-based revenue fundamentally changes your forecasting challenge. Metrics designed for subscription predictability will mislead you when applied to usage-based models.
2. Cash Forecasting Becomes Exponentially Harder
In a subscription model, billing is predictable. Invoices go out on schedule, and collections follow established patterns. Consumption-based revenue introduces volatility at every stage: usage fluctuates, billing lags behind consumption, and collections become harder to predict because customers dispute charges they didn't anticipate.
Bob Gold, a serial private equity CFO, emphasises cash as the ultimate measure of business health, and the metric most distorted by consumption complexity. "It's cash that drives the business," he states bluntly. "Adjusted EBITDA, depending on your debt agreement, has so many adjustments in it that it's nothing close to describing the health of the company."
When consumption varies month to month, the gap between recognised revenue and collected cash can widen unpredictably. Gold describes the transformation he drove at one portfolio company: "When we redid the first cash forecast, the sponsor's exact words were, 'Wow, before I felt like we were speaking a foreign language and now we're speaking English.'"
That translation work, converting consumption patterns into reliable cash forecasts, requires fundamentally different approaches than subscription forecasting. You need visibility into leading indicators of consumption, not just trailing indicators of billing.
Michael Vigario, CFO of the Americas for ACT Group, describes the challenge of operating in trading environments where revenue is inherently transactional: "It's much more market focused, looking at who our customer base could be, what customer churn looks like, what product margins look like, to sort of cash plan and show expectations."
The shift from product-centric to market-centric forecasting is essential when revenue depends on customer behaviour rather than contract terms.
📌 Takeaway for CFOs: Build cash forecasting capabilities that account for the lag between consumption, billing, and collection. In consumption models, revenue recognition and cash receipts can diverge significantly.
3. Traditional Pipeline Metrics Lose Their Meaning
In subscription SaaS, the sales pipeline provides a relatively reliable window into future revenue. Qualified leads convert at measurable rates, deals close with predictable values, and contracts translate directly into bookings. Consumption-based models break this chain at multiple points.
Richard Simons, a serial private equity CFO, describes the metrics that matter in traditional forecasting: "What's the cycle time from a qualified lead to a won deal? Critically, what conversion rate is in play in the organisation? Essentially, how many qualified leads would you need before you're actually going to win a deal, as well as average order value."
But when revenue depends on post-sale consumption rather than contract value, average order value becomes nearly meaningless. A signed contract might represent anything from minimal usage to massive consumption, and you won't know which until months after the deal closes.
Simons acknowledges the limitation of traditional approaches: "CRMs will help you with perhaps 90 days, 120 days into the future." For subscription businesses, this horizon is manageable because contracts extend predictability. For consumption businesses, 120 days of pipeline visibility tells you almost nothing about what customers will actually consume.
Neil Hodson, who has led finance across FTSE 100 companies and private equity-backed businesses, emphasises the importance of understanding unit economics at a granular level: "What's the actual contribution once you take into account all your selling costs - your marketing costs, your onboarding, your commission costs and everything else? What is the contribution per salesperson to your bottom line?"
In consumption models, this calculation becomes dynamic rather than static. A customer's contribution changes based on their usage patterns, not just their contract terms.
📌 Takeaway for CFOs: Develop leading indicators that predict consumption behaviour, not just contract signatures. The moment of sale is no longer the moment revenue becomes certain.
4. Finance Must Get Closer to Product and Customer Success
When revenue depended on contract renewal, finance could operate somewhat removed from daily customer interactions. Annual or quarterly reviews provided sufficient visibility into retention risk. Consumption-based models demand continuous engagement because revenue fluctuates continuously.
John Henderson, Deputy CFO at MIQ, describes the partnership model that modern finance functions require: "How do we partner with the CEOs or the commercial leads of the business and get them to pitch for profitability or payment terms or maximise their revenue? Looking at new opportunities and assessing that."
This partnership extends beyond sales into product and customer success. When usage determines revenue, understanding what drives usage becomes a core finance responsibility. Henderson emphasises: "Can we do good retention analysis with clients? Can we look at the profitability of clients? Can we get deep down on what we're selling? Where are we winning? Where are we losing in the market?"
Michael Vigario highlights the critical role of business analysts who can translate between technical systems and financial implications: "Having that business analyst that is interested enough in the underlying product, that can bridge that gap, has been for me the game changer." These translators understand how product changes affect usage patterns and how usage patterns translate into revenue.
At CommonBond, where Vigario previously served, the finance team evolved from monthly reporting to daily reporting as systems matured: "At first we were doing the best of reporting monthly because we would get all of the reports on the underlying loans monthly, and we moved to a place where we could do it daily." This acceleration was driven by customer demand; loan purchasers needed daily data, but it also reflected the reality that consumption-based businesses require faster feedback loops.
📌 Takeaway for CFOs: Break down the walls between finance, product, and customer success. Usage-based revenue requires understanding customer behaviour at a granularity that quarterly reviews cannot provide.
5. The Forecasting Cadence Must Accelerate
Monthly forecasting cycles that work for subscription businesses become dangerously slow for consumption-based revenue. By the time you've closed the books on last month's consumption, the patterns may have already shifted.
Keith Taylor describes Equinix's forecasting discipline: "We re-forecast every single month. So after every month, we're re-forecasting the rest of the quarter and the year. And then we have a budget that we operate with." This monthly cadence works because 95% of Equinix's revenue is contractually committed.
For businesses with significant consumption-based revenue, monthly may not be fast enough. Neil Hodson describes the Barclays approach that shaped his forecasting philosophy: "Barclays run very heavily on forecast. Actuals were sort of a secondary piece. They're sort of, are we near it or not? But what does it look like? What does that do to my future state?"
This forward-looking orientation becomes even more critical when revenue fluctuates with usage. Hodson emphasises that forecasting cannot be divorced from operational understanding: "How can you adjust a forecast if you don't know what impact in reality that's going to have? Because you can change forecast figures quite easily. We can all do that. But what does that do to the business?"
Michael Vigario describes the infrastructure investment required: "The better the integration, the less manual touch points and the more accurate your numbers are in a quicker way." When consumption patterns can shift weekly or even daily, manual forecasting processes become unsustainable.
📌 Takeaway for CFOs: Evaluate whether your forecasting cadence matches the velocity of your revenue model. Consumption-based businesses often require weekly or even real-time visibility into usage trends.
6. Investor Expectations Haven't Caught Up
The metrics that investors and acquirers demand were largely designed for subscription businesses. Rule of 40, net dollar retention, CAC payback - these frameworks assume a level of predictability that consumption-based models cannot provide. Finance leaders find themselves caught between business models that have evolved and investor expectations that haven't.
Sun Choi notes the increasing emphasis on efficiency metrics: "That rule of 40, I think, is pretty important. I think that's come up a lot more recently than before the ZERP era." But the rule of 40 assumes you can reliably measure growth rate - a straightforward calculation for subscription revenue, a moving target for consumption-based revenue.
Marie Charpentier describes the different expectations between VC and PE investors: "Venture capital, they're more about growth. Obviously, profitability is a hot topic right now, but it's still about growth. While in private equity, I feel like EBITDA is the word that comes back to most of our board meetings."
Neither framework cleanly applies to consumption-based businesses. Growth metrics are volatile because usage fluctuates. EBITDA is unpredictable because costs may be fixed while revenue is variable. CFOs must educate their boards and investors on why traditional metrics may mislead rather than inform.
Richard Simons warns about the consequences of missing forecasts during critical periods: "Make sure that you've set yourself up to meet or preferably exceed, not by too much, your forecast and your budget. That spooks investors." When consumption patterns make forecasting inherently harder, the risk of misses increases, and so does the importance of setting expectations appropriately.
📌 Takeaway for CFOs: Proactively educate investors on how consumption-based revenue affects traditional metrics. Set expectations for appropriate volatility rather than promising subscription-like predictability you cannot deliver.
Building Forecasting for the Hybrid Future
The CFOs we interviewed share a common recognition: revenue models are becoming more complex, not less. Pure subscription businesses are increasingly rare as companies layer in usage-based pricing, transaction fees, and consumption components. The forecasting capabilities that served the subscription era need fundamental upgrades.
Bob Gold captures the mindset required: "If you understand the balance sheet, you understand the business." In consumption-based models, understanding the balance sheet means understanding the operational drivers that determine whether customers consume more or less, and building forecasting systems that translate those drivers into reliable financial projections.
The companies that navigate this transition successfully won't be the ones with the most sophisticated spreadsheets. They'll be the ones who recognise that consumption-based revenue requires different data, different metrics, different cadences, and different relationships between finance and the rest of the organisation.
Traditional forecasting assumed that contracts created certainty. The new reality is that contracts create optionality for customers to consume more, less, or not at all. Finance leaders who build forecasting capabilities around this reality will find themselves far better positioned than those still trying to force consumption revenue into subscription-shaped models.
Build Forecasting Discipline with Kluster
When revenue models grow more complex, forecasting discipline becomes essential. Kluster helps finance and revenue teams move beyond spreadsheets to build accurate, AI-driven forecasts, connecting CRM pipeline data to financial projections with the visibility CFOs and boards demand.
Start your test pilot: https://www.kluster.com/test-pilot
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