Have you built a Revenue Layer Cake?

During the weekend catchup with some of my friends, I asked them if they have prepared a revenue layer cake for their companies and all of them told me that they have heard this term for the first time.

In fact, not many people know about this concept. Here’s my understanding of the layer cake and why it is a great way to see/comprehend your business growth. So let’s jump and see how it works.

Taking the example of ABC Company, which started in 2017 and has grown from $100k to $10m in ARR. Below are the 3 visualizations which can help us understand their growth story.

Graph 1 shows YoY growth which I am sure every company is tracking and showing internally and externally.

Graph 2 shows YoY growth with the yearly cohorts as stacked bars. It helps us to understand the contribution of new customers vis-a-vis old customers belonging to different cohorts.?

Graph 3 shows the layer cake which helps us clearly to understand that the 2020 cohort is the strongest and the company is not only acquiring new customers but the revenue from existing customers is also growing YoY.

Have you built your company’s layer cake? Try it out. For Google Sheet/Excel template, comment on the thread with your email ID.

Fun Fact: Check out the S-1 filing of Slack, Dropbox, and Justworks to see their layer cake.