SaaS financial projections - online training programme

I am delighted to published my 7th online training programme. This will be my second one focusing on Financial Projections. It is called ‘Creating Financial Projections for your SaaS business‘. It is aimed at owners and senior team members who are bringing a SaaS product to market. The Excel template will facilitate you to create 4 years of cash flow forecasts, and 4-year P&L and Balance Sheets and my self paced video-based programme will guide you on how to use my tailored Excel Template to create financial projections for your SaaS or subscription-based pricing model.

watch the 2 minute video about my SaaS financial projections online programme

Who is this for?

There are two answers to that

  1. I use a scenario to demonstrate the Excel template. I use the details in the scenario and provide instructions on how to complete the financial projections using the downloadable template. So if the scenario details closely match your SaaS or subscription pricing model then you will have a very quick and convenient way to create sophisticated financial projections for your business.
  2. The online programme will also be of benefit to anyone who wants to learn more about projections and the process for creating financial forecasts for a startup. It shows how to factor in Startup Investment by promoters, External Investment, a medium term loan along with capital expenditure and depreciation

My first financial projections online programme ‘Financial Projections for a Local Business‘ is tailored to a model where the business sells a small number of services and a few products – it would benefit from Word of Mouth and repeat usage but would not have a subscription model where customers automatically pay the same fee every month per user. Every business is different so it is important to match the pricing model in your Excel when creating financial projections.

The scenario details

I would know of several Irish companies who operate a SaaS model. Two that I mention in the online training are One Page CRM and Yellow Schedule as I looked at their pricing models for inspiration for my scenario.

  • The business has several pricing tiers, a basic package and a premium offering and perhaps a mid-tier option also. [reminded of the excellent HBR article “The Good-Better-Best Approach to Pricing“]
  • Customers can buy on a monthly basis per user or pay for a full year per year availing of a discount like the one provided to me last year by Zoom and also Calendly.
  • Customers can also leave at any time i.e. your business experiences churn like every other SaaS business.. The upside is that once they have signed up you could have a customer for life!

What all this means is that you need to create a financial model that factors in customer retention and churn. And this is exactly what we have done.

Did you know that if you sell licenses to Product 1 to 10 new users each month, for €10 per user per month, that the turnover from Product 1 at the end of Year 1 (12 months) is €6,470 if you assume that churn is 5% on a monthly basis, that is that you will lose 5% of total users each month. Sales would be 120 licenses and you will have 91 active users at the end of the 12 months. (Please note that I have used Rounding on a monthly basis because you cannot have part of a user).

I read loads of blogs about SaaS on topics to include: marketing funnels, metrics and how to measure churn. It is like a rabbit hole so my conclusion is that you need to know how exactly the Spreadsheet is calculating Churn so that it can be quickly explained to interested parties. I use the simple formula and I did round down per month or at the end of the year where users signed up to the annual plan.

What is churn and how is it calculated

The simple formula for Churn Rate for a period is the number of customers churned (those who stop using and paying for the product) in the period divided by the total number of customers during the period.

About the Excel Template

The Excel template is fairly sophisicated whilst still being user friendly. Excel is great because you can link cells and put in some nifty formulas. What this means is that when you put in the number of new users per month per product or revenue stream, that turnover for that revenue stream is automatically calculated. This is all done in a sheet called Revenue Model. The blank template has 7 revenue streams but this can be easily increased. So while the Excel does a lot of work, all the user has to do to figure out Sales is:

  1. Rename the 7 revenue streams – two are these assume monthly prices while 3 assume yearly prices (all on a per user per month basis)
  2. List the price for the 7 products or revenue streams. Please note that the price can be changed for each year if required.
  3. Put in the target units to be sold of each product in each month of the 4 years.
30 seconds to showcase the Excel Template (there is no commentary)

Please note that I have included 4 years as Investors generally want to see 3 years of forecast and for accuracy you will want to show the financial position in the year before the money is received. So the 4th year of figures is very useful.

End result and benefit to you

My objective is that after watching the video (modules are just over 2 hours) you will be able to use my Template, possibly with some tweaks, and create financial projections for your SaaS or subscription business.

Please feel free to tell anyone with a SaaS business idea about my online programme for Creating Financial Projections for a SaaS Business. Comments on this post and social shares are most welcome.

Best regards

Donncha (@donnchadhh on twitter)

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