SaaS Financial Modeling

SaaS Financial Modeling Services

SaaS Financial Modeling Services

SaaS financial modeling is one of the key tools every SaaS business needs to utilize. SaaS businesses are unique. They operate on a different set of metrics and strategy. That is why you need to capture operating data and convert that data into insightful SaaS analysis to react to changing business conditions or implement a modified strategy. SaaS and subscription software businesses are unique in that their financial measurements and KPIs are different from traditional businesses that measure their performance based on product costs, work-in-process, inventory costs, inventory turns, etc. We know key SaaS performance metrics focus on MRR (new, churned, and expansion), Churn metrics, Unit economics (LTV, CAC, ratio analysis, months to recover CAC), Cash Flow, Funnel Metrics, Sales Metrics, as well as the traditional EBITDA. SaaS financial modeling is one of the most effective tools an emerging SaaS business can employ because it provides you with “operating analysis,” not just data, about the health of your business.

Why do businesses need SaaS Financial Modeling?

SaaS businesses are complex. They exist in a fast-paced, dynamic world where capturing market share and growth is the difference between stardom and a line item on your resume. A best-in-class SaaS financial modeling effort can make a material difference to the management team, especially if they must:

  • Gain better insight and control of the business,
  • Identify and focus on the real problems and issues of the business,
  • Perform “what-if” analysis to fine tune strategy,
  • Project business budgets and needs for future periods based upon different business strategies and assumptions,
  • Utilize the insight and performance measurements to raise additional capital.
What can a SaaS Financial Model do for you?

SaaS Financial Modeling KPI Dashboard

SaaS financial modeling can gather and analyze raw business data to create key performance indicators (KPIs) of the business’ health. For example, a well-designed dashboard can provide you with insight into your Funnel metrics, bookings, MRR, Churn Metrics, LTV, CAC, and months to recover CAC. An understanding of these metrics is crucial to managing the business through the growth cycle and effectively monetizing the business.

Forecast resources needed to accomplish future business plans given different operating strategies (% growth, new product introduction, changes in cost structure, etc.) and resources (cash, headcount, etc.).

Provide the ability to summarize current and projected performance in understandable ways that communicate business decisions to management, board-of-directors, and investors.

What are the characteristics and components of a best-in-class SaaS Financial Modeling?

Best-in-class SaaS financial models have:

  • A proven structure with modules that can be easily customized to generate the breadth and depth of functionality needed;
  • Built-in “knowledge” of the financial application(s) needed to accurately reflect the business operating strategy. For example, do you have a simple low-touch sales model where most customers convert from a free 30-day trial subscription or is your sales model high-touch where sales personnel drive revenues? Modeling the high-touch strategy would require a more complex input module incorporating sales headcount, commissions, tiered or volume product pricing, and regional support. Likewise, the analysis effort would be more complex requiring cohort analysis of the various sales personnel.
  • Are Custom built using the integrated structure and modules/algorithms, reflect how your business is run,
  • Can be modified and maintained by your staff.
What are the major elements of a SaaS Financial Model?
  • Business Data – Company structure, products, services, pricing, operating strategy, business model
  • Input Data – Historical Financial Data, Assumptions, Employment Build
  • Financial Model / Algorithms – Consolidated 3 Statement Model (CAC Analysis, Balance Sheet, P&L, Cash Flow), Detailed P&L, Revenue Build, Sales Model
  • Outputs –Current Financial Statements, Financial Projections, Valuation, KPI Dashboard, LTV & CAC Analysis

The first step in any SaaS financial modeling development effort is to understand the company, its business model, products and services, structure, and operating strategy. A best-in-class financial model should accurately reflect attributes of the business and how it is run. Once the business data is defined the structure of the model is created. Input data is used to create a starting point for the model (historical actuals), define the assumptions used in generating future projections, and capture projected cost changes. The financial model and its associated algorithms are defined to comply with recognized accounting rules and company specific requirements. For example, accounting rules may allow revenues to be recognized in several ways, but company requirements define which specific revenue recognition policy will be used. The model will create a detailed analysis of the business financials from the business data and input data. Model outputs are general summaries of the detailed data, presented in a manner that is easy to understand (summary financials, graphs, and charts).

Here are examples of typical model outputs:

SaaS Financial Modeling CAC Analysis   SaaS Financial Modeling P&L   SaaS Financial Modeling Balance Sheet   SaaS Financial Modeling Cash Flow    SaaS Financial Modeling ValuationSaaS Financial Modeling KPI Metrics

SaaS Financial Model FAQs
Are models specifically developed for each customer? What is the development process?

SaaS Financial Modeling development cycleYes, models are specifically developed for each client. Why – because each client is unique and has their own operating strategy. We use a 5-step development process to ensure the model meets the functionality and performance requirements for each customer. The overall process takes about 3-6 weeks and includes the following steps:

Step 1 – Listen, Learn, Gather Data. The first step is always to listen and learn about the business, the client, and the objectives of engagement.

Step 2 – Validate Assumptions and Data

Step 3 – Build & Validate the Model

Step 4 – Iterate Business Scenarios

Step 5 – Model Delivery, Documentation, and Training

Why are our models so effective in providing customers with better insights into their businesses?

After working with hundreds of customers improve their business insights through the use of a SaaS financial model, we have come to understand the key differences between what we do and others in the marketplace. Here is why are models and services are more effective:

  • We are not starting from a blank sheet of paper. We have invested thousands of hours developing an integrated structure and the core modules that become the foundation of the model. Think of our base modeling structure as the bones and skeleton to which we add your custom data, algorithms, and output requirements. This approach provides clients with a custom, professional quality financial model at a competitive cost and in an expedited time-frame.
  • We have an exceptional financial knowledge base and experience, specifically targeting SaaS and Software businesses. SaaS and subscription software businesses are unique in that their financial measurements and KPIs are different from traditional businesses that measure their performance based on product costs, inventory costs, units sold, etc. We know that key SaaS performance tend to focus our analysis around Monthly Recurring Revenue (MRR), Revenue and Customer Churn, Customer Metrics (LTV, CAC, ratio analysis, months to recover CAC), Cash Flow, Marketing Funnel Metrics, Sales Metrics and more traditional metrics like Gross Margin and EBITDA.
  • Our SaaS financial models and financial insights have proven results. Over one hundred SaaS and emerging software / technology businesses have successfully used this approach to: gain better insight and control of their business, focus on the real problems and issues, utilize the insight and performance measurements to raise additional capital, and communicate the best information and trends to board members, potential and current investors and management.
  • We are responsive to your needs with quick delivery (usually 3-6 weeks) at a highly competitive price.
  • We ensure that all individuals who use the model will be fully trained in accessing and adjusting model parameters and variables. We want the model to become a key management tool that you own, utilize, and modify as your business needs change.
Highlights of SaaS Financial Modeling engagements we have completed:
RightSmith305x90
Financial Model Tests Operating Strategies - RightSmith Case Study

Cordes Consulting provided a financial model of the business with future projections, with a roll-up of historical financials from each subsidiary in the parent company's currency. The model provided RightSmith with visibility into their current financial performance and allowed management to test various operating strategies incorporating financial projections from potential acquisition targets. This information was critical to evaluate the financial impact of incorporating acquisition targets into the RightSmith business, and the impact to cash flow.

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gerbertech_logo
Financial Model Aids Conversion to Subscription Sales Strategy - Gerber Case Study

The Gerber Technology consulting engagement focused on evaluating a shift from a perpetual license sales model, to a subscription based sales model. This complex assignment required the build out of a strategic plan and financial model covering the transition process. Particular emphasis was placed on the revenue mix as the legacy maintenance revenue stream slowly converted to recurring subscription revenue. In addition, management needed tools to help spot issues in MRR and CAC metrics, something that is not relevant to a perpetual license business model.

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ManagerPlus_logo
Financial Model 5-year Projections - ManagerPlus Testimonial

The ManagerPlus consulting engagement initially focused on developing a full SaaS financial model of the business (financial projections, headcount build-up, valuation module, revenue build, three-statement financial model, LTV & CAC analysis, etc.). Subsequent efforts are concentrating on a "deep dive" into their Sales & Marketing organization and strengthening the marketing and lead funnel analysis. The objective is to build out variables that affect 5-year projections as accurately as possible, and develop a robust 5-year business plan for achieving growth objectives.

Read More >>


Our Customer Testimonials Highlight the Skills, Knowledge, and Accomplishments
Cordes Consulting Brings to Every Engagement.
See what customers say about Cordes Consulting ...

Extremely thankful to have expert help …

Cordes Consulting provides expert help to Geekatoo

Will has helped us in a variety of ways, from defining alternate business strategies and modeling their business impact, to providing needed information to support additional capital funding. We knew from the beginning that we were in good company with the questions he asked us about our business. Since he’s invested, he’s offered to help us many times, including how to think about future valuation and the components that make this up. As we move into our Series A territory, I’m extremely thankful we have Will’s expert help with us to navigate the process and ensure we’re on the right track.

Kevin Davis, CEO
Geekatoo

Extraordinarily responsive and repeatedly took the initiative …

I worked with Will on a complex transaction with evolving regulatory requirements, higher than normal leverage and a tight timeline.  Will worked extraordinarily hard to get up to speed with the industry and the multiple anomalies in the deal.  He was extraordinarily responsive and repeatedly took the initiative to prepare client documents before I asked for them.  I would hire Will again in a heartbeat.

Tom Fencl, Managing Partner
Wisper Ventures

Very knowledgeable and responsive …

I would highly recommend Will for your financial modeling and consulting needs.  While participating in Y Combinator, we needed help building a financial model and we came across Will’s website.  Will is very knowledgeable and super responsive.  We look forward to partnering with Will on future projects.

 

Wayne Anderson, Founder & CPO
SmartAlto

Experts in transitioning to a subscription sales model …

We brought in Cordes Consulting to help us transition from a legacy perpetual license sales model to a subscription sales model given their expertise within SaaS. Will and the Cordes Consulting team proved to be very knowledgeable of the space and worked hand-in-hand with our team every step of the way. Cordes Consulting would be an asset to any software business in need of financial and business modeling services.

Karsten Newbury, SVP and GM
Gerber Technology

Immediately impressed with their experience and knowledge …

We were in the market for a fractional CFO to help us build a financial model and prepare us for a potential fundraise, but had difficulty locating someone with a strong SaaS background. Eventually, we teamed with Cordes Consulting and were immediately impressed with their experience and knowledge. Cordes Consulting quickly generated a complete financial model and acted as the internal finance lead on our $5 million Series A fundraise.

Benny Baltrotsky, CSO
eSUB Construction

Efficiently created presentation and deal materials for fundraise …

Cordes Consulting provided strategic consulting services and immediately fit in like an active team member. They worked quickly and efficiently and tackled every obstacle in what ultimately became a complex project. We would highly recommend their services to anyone considering the use of a consultant for any sort of financial engagement.

Paul Mulvaney, Principal
SE Capital

How can we help you?

Questions? Feel free to reach out about any potential opportunity, project, or investment opportunity. We are always willing to help.

If you are a SaaS or software focused business looking for a financial modeling services, look no further. We are experts in this space and the only strategic financial consultants that focus exclusively on this area. We will beat typical custom model pricing, build you a tailored and customized model, and do it in your time-frame, something that no other consultant can match.

Improve your business performance -- contact Cordes Consulting today.

Cordes Consulting is a Chicago based consulting firm specializing in financial services for Software-as-a-Service (SaaS) and emerging technology businesses. We offer free initial consultations to evaluate how we can help you. If you would like to discuss a potential consulting assignment, or just have a question about our business we are always available to help you.

Cordes Consulting, LLC
710 N. Orleans, Unit A
Chicago IL 60654

Telephone: +1 513-312-8476
E-mail: Will@SaaSFinancialConsulting.com

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