What is the SaaS Financial model?
A financial model is a crystal ball of information around the future performance of a business, based on some simple assumptions you can make.
Blox have put together a selection of different blocks, which together will give you an overall view of the key aspects of your entire SaaS business. No more ‘going with your gut’ alone - model the outcomes and make informed decisions!
Each block has its own inputs and analysis to give clear insights into each individual section of the business. By breaking up each area of the business into bite-sized, understandable blocks, we can work through the plan piece by piece to create a full Financial model in record time.
What Blocks does the SaaS Financial model contain?
Subscription Revenue - as a SaaS business, recurring revenue from subscriptions is the key form of income. Use the subscription revenue block to model your future revenues based on the pricing and growth rates of your different subscription products.
Services Revenue - whilst subscriptions may be the primary revenue stream for a SaaS business, many leverage Professional Services to create a second revenue stream. This can often include onboarding or configuration fees, as well as training or consulting services. The service revenue block allows you to account for additional revenues generated from these services.
Workforce Costs - Plan your headcount and workforce costs, plan for new hires and track your spend by department. Understand how changes in workforce size, spend and hiring timing can affect your costs and business growth.
Marketing conversion - Plan your advertising spend and key marketing ratios to estimate the number of leads for each marketing channel. Understand how increased spend and improved conversions can help deliver more leads and stronger marketing performance.
General Expenses - Input and understand your general business expenses. Where are you over-spending? How will this impact the overall profitability of the business?
COGS - COGS represents the Cost of Goods Sold. For a SaaS business this can consist of the Salaries of the customer success team, infrastructure costs and other costs incurred in the application platform (such as payment processing costs).
Financing - What fundraising have you undertaken? What loans have you taken out? Interactively fill out your finance register which can feed directly into your cashflows
Department Summary - Stay on top of your costs by viewing a summary of each department’s key expenses, and how this may change in the future.
Income Statement - Often also called a Profit and Loss statement (P&L) - the income statement is a high level overview of how the business is performing. The Income statement block takes information from all of the connected blocks to automatically create an insightful and perfectly laid out Income Statement. Ideal for your investor meetings!
Cashflow - Connect the revenues and costs from the other blocks to your cash balance - giving you visibility into the likely month on month cash balance throughout the planning period. With a solid financial plan you can take action early to avoid any nasty surprises in the bank balance.
Key SaaS Metrics - View some of the key metrics commonly used to measure performance of a SaaS business - with no additional complex calculations. With the information already provided in the SaaS financial model, we can calculate some of the metrics which are key to track for SaaS businesses. Values such as annual recurring revenue (ARR), the life-time value of a customer (LTV) and customer acquisition costs (CAC) are all common indicators for the performance of a SaaS business.
How will you use this model?
Modelling with Blox is fast and fun! You can create a plan in 5 minutes by following the simple guided steps:
- Select your planning timescales
- Work through each block one by one, entering some simple input values
- View some of key analysis for each individual block through an interactive insights page, and adjust your inputs to see different scenarios
- View the summary blocks such as the Income Statement and Cashflow to get the high level overview of the future performance of your business
- Save your model and share it with others!
When should you be modelling your business?
The SaaS financial model should evolve with your business, although it can be particularly important for when you are going for fundraising, or budgeting for the year - keeping an accurate and up to date financial model is good practice for any business.
Circumstances can change, your assumptions may have been wrong or you’ve changed the way your business works slightly. There’s tons of things that can impact your model. By constantly checking, updating or creating new models you can ensure your business can adapt quickly to change, make data-driven decisions and stay ahead.