SaaS Financial Model
baremetrics.com
baremetrics.com
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.
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.
"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."
I always assumed he had calculated them correctly, but looks like his projection of $2.7MM ARR in 12 months might be a typo ($625k starting ARR with 15% annual growth is $3.3M, his figure is 20% less. Maybe he accidentally calculated Gross Margin run rate).
Here's a similar example illustrating the difference between 12 month and 6 month payback at different growth rates. The cells highlighted in yellow are inputs, so you can change the numbers and see how the capital requirements will change for the year.
https://docs.google.com/spreadsheets/d/1-kaIW6uvvMBER1efk8Yz...
[1] direct PDF link - https://www.key.com/kco/images/2020_KBCM_SaaS_Survey_8102020...