Learn how to build a SaaS financial model

30.6.2021
Angelica A.
  |  

Mastering how to build a SaaS financial model can translate into significant leverage for startup fundraising. Even if just to present a model to a board during a company’s early stages, a perfectly-built SaaS financial model can make an enormous difference. And we all know how vital a model of this kind is for scaling and in terms of revenue. So, let’s not delay! We’ll go right into learning what a SaaS financial model is and how to build one. 

What is a SaaS financial model?

Like any other financial model, the goal of a SaaS one is to predict (and order) a company’s performance in terms of finances. What a SaaS financial model does is outline startup performance to date to make invaluable projections. 

Know that an accounting spreadsheet is very different from a financial model, though. Both documents can work together for better accuracy on spending and revenue. And financial statements certainly help, especially per month and year. But a financial model essentially differs from what accountants keep on their daily table, let’s say. 

On a SaaS financial model, you’ll come up with variables to create projections and predict behavior, so you can scale adequately and make the most relevant decisions. 

Why you need a financial model

Using a SaaS financial model lets you see how to best direct growth for a starting company. It’ll set a path or way to achieve what can be your ideal targets for the time being. Thus, it produces specific milestones to help business owners, investors, and relevant stakeholders have a better chance at financial success. 

In doing so, a financial model can easily stand behind a great team, one that’s visible by the way the modeling is conceived even. Or it can quickly signal a need for a better-constructed pick of an outstanding and ideal team, as well. 

In other cases, a model of this kind can stir up more - and other - questions. It can do so, especially around items that need revision or better care, including shedding light on a sudden need for new processes. 

Financial models can point to areas where more focus or new thoughts are needed. And it can effectively nurture our strategies by letting us know how aggressive we can be in a given market. 

They can also help determine how much money we need to put together, exactly, at any given time. As it stands, how we build a SaaS financial model can make or break our pitches, if not also our businesses. So, we’ll show you how to get a great one for your own needs.   

What a SaaS startup financial model is used for

SaaS financial models are designed to help companies facing pre-seed as much as seed A and B stages. They’re also there to lend a hand with post-funding settings, as well. 

As we’ve said, SaaS startup financial models are good in these scenarios to make forecasts on financial matters. And for SaaS businesses, in particular, these can help measure subscriptions as much as bookings and billings. 

But they also help define KPIs, churn, revenues, sales, cash flow, etc. With them, we have access to the analysis of fundamental metrics, such as consolidated data on statements, balance sheets, summaries, charts, and more. 

Let’s recall the importance of KPIs.

In case KPIs for a SaaS are somewhat unclear, we’ll bring back a note published under our SaaS company KPI’s ultimate guide. With SaaS KPIs, needs finally come down to MRR and ARR (including expansion, contraction, and reactivation MRR), churn rate (which also means negative, customer, gross revenue, net revenue churn), lifetime value estimations, and cost of acquisition. This includes the LTV to CAC ratio and the understanding of cohorts. 

Now that this summary’s clear, we’ll get to the juice of learning how to build a SaaS financial model.

How to build a SaaS financial model

Our CEO made a video on this not too long ago. And it’s our ideal recommendation to follow it as it’ll guide you minute by minute over what can otherwise and undoubtedly turn into a very complex Excel sheet. And a frustrating process.  

Learn how to work through a single book and multiple sheets to make the best of your financial future. In the video we mention, Caya goes step-by-step into a complete financial modeling tutorial. 

Through it, you can follow specific directions on Excel to see how financial models are created. He’ll explain the cells he’s using, come up with examples on what he’s covering and give you tips to move your process of creating a financial model along just fine. 

Knowing how to build a financial model for a SaaS business is just such a crucial topic for any startup that it interests our audiences. And we gladly keep helping out with more any way we can. 

For this webinar, for example, Caya addresses the question in real-time with our followers. He goes all-in, to the point we included free books to our more than 800 registrants and what turned out to be above 150+ people in a live audience at once. Don’t miss out! See Caya go at our financial model spreadsheet right away, if you’d like. 

Use a base on Excel for your model.

For the above, Caya relies on a particular financial model spreadsheet, as we just mentioned. And this is vital as you’ll probably need to create one, too. Yet, there’s no need to do so from a complicated scratch! 

To be honest with you, ours isn’t just an Excel spreadsheet. This gem’s one Caya himself developed alongside one of our backing venture capitalists, Carao Ventures. And it’s now ready for use by anyone who wants it. 

Our tool naturally evolved endlessly until it became the secret and fundamental backbone of our operations management. So, you know we’ve put it to an extended test. In the end, it’s also what we’ve used to run this company for 5+ years of a profitable operation. So there’s some proof in that pudding. Please feel free to go ahead and download or play Caya’s video to get a better sense of more. 

Of course, we love sharing our resources with you, which is why our spreadsheet’s very easy to download and customize to make the best of it for your purposes. We hope you like it! 

Slidebean’s Consulting and Design agency is also here to help. From model design to elegant slide reviews, we’re here to guide you through it all if you’d like. Genuinely, we wish you the best of luck with that! As usual, just let us know if you were to need anything or see room for more.

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