[HN Gopher] SaaS Financial Model
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       SaaS Financial Model
        
       Author : gk1
       Score  : 138 points
       Date   : 2020-09-25 11:59 UTC (11 hours ago)
        
 (HTM) web link (baremetrics.com)
 (TXT) w3m dump (baremetrics.com)
        
       | JaakkoP wrote:
       | Author of the model here. First time on the front page with my
       | content - thanks for sharing!
       | 
       | This is the same model I used to service several dozens of SaaS
       | companies a month when we didn't have any software to help us.
       | 
       | The idea was that I need to have one core template that I can use
       | to quickly onboard companies around $1m in revenue, while keeping
       | it modular enough to add more complex forecasts or metrics for
       | companies in the $5-20m range. (Not all of those more complex
       | pieces are in this template though).
       | 
       | I'd appreciate any feedback on the model! There's definitely a
       | lot of legacy stuff I would do differently if I were to start
       | over.
       | 
       | I'm planning to update it this fall to make it simpler to get
       | started, while keeping the structure robust enough to keep adding
       | forecasts & reports over time. Maybe a video how-to would make
       | the learning curve a little less steep as well.
        
         | crizzlenizzle wrote:
         | The example in your blog post. Are those numbers close to
         | reality? I'm just blown away by the CAC in the SaaS world.
        
           | molsongolden wrote:
           | Jaakko mentions not being a fan of benchmarking against the
           | average startup but, for a gut check, the recent KBCM SaaS
           | Survey[1] puts the median blended CAC payback period (>$5MM
           | ARR) @ 18mo using 2019 data, ~21mo using 2020 YTD.
           | 
           | [1] direct PDF link - https://www.key.com/kco/images/2020_KBC
           | M_SaaS_Survey_8102020...
        
           | JaakkoP wrote:
           | It's all dummy data which makes the metrics sometimes look a
           | little wacky, but I tried to model everything based on real-
           | world examples I've seen.
           | 
           | The Customer Acquisition Cost (CAC) is high, but so is the
           | ARPC (Average Revenue per Customer), so you can't just look
           | at the one number in isolation to see if it's realistic or
           | not.
           | 
           | In this case, I'd look at the CAC Payback time and the
           | CAC:LTV ratio to see if these acquisition costs would be
           | realistic in any kind of a company. The payback time climbs
           | from 6-8 months to 19 over time, which is a pretty clear
           | indication that this is unlikely to be a bootstrapped
           | company. They just wouldn't have the capital to sustain it
           | long-term, unless they sell mostly multi-year deals paid in
           | advance.
           | 
           | For a VC Company, 19 months would be on the high end for
           | sure, but not unheard of. Dated, but still great article from
           | Tom Tunguz[1] says the SaaS median is 15 months, indicating
           | there are a lot of companies with longer payback times.
           | 
           | Finally, if you look into the future projections you'll
           | notice that the payback time grows to 26 months. Unless you
           | have clear understanding why this should happen, this is more
           | likely an indication that your forecast isn't very good.
           | (Which, I'm realizing typing this, is quite ironic). Either
           | your revenue growth is not fast enough in your forecast, or
           | if it is the maximum you think you can do, your S&M spending
           | is too high and your business just isn't sustainable. Or
           | something else.
           | 
           | [1] https://tomtunguz.com/payback_period_cash/
        
             | elixirelixir wrote:
             | From the link above, how did they calculate the 7.8M CAC
             | with a 12 month payback period? I assume it is based on the
             | data below, but how did the number end up to 7.8M:
             | 
             | "Let's take a hypothetical example of a SaaS company at
             | $625k in ARR, growing at 15% per month. The company has 25
             | customers each paying $25,000 and operates with an 80%
             | gross margin. The company bills monthly."
        
         | gk1 wrote:
         | Jaakko also founded the SaaS financial planning software
         | Flightpath, mentioned in the post:
         | https://www.flightpathfinance.com/
        
         | wmab wrote:
         | Thanks for sharing! This is the first time I've seen this model
         | and looks to accomplish a lot, so will definitely have a play
         | around with it!
        
           | JaakkoP wrote:
           | Great to hear! Feel free to shoot me any questions here or on
           | Twitter. @JaakkoPiipponen
        
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