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SaaS Business Plan

Congratulations! You have found an innovative software solution and are on the brink of launching your SaaS business – that is commendable.

Whether it is a new product that you are introducing or looking to revamp existing SaaS software, a sound SaaS business plan is your essential guide to climbing the ladder of success.

We understand that crafting a business plan for your SaaS business can seem challenging. That’s why we’re here with our SaaS business plan template , to simplify the planning process and assist you in creating a roadmap for your SaaS.

Key Takeaways

• A SaaS business plan helps you define your marketing strategy, customer acquisition strategy, retention strategy, and strategies to achieve your business goals.
• Craft an impactful executive summary that outlines the type of your SaaS business, marketing approach, financial outlook, and team expertise to attract potential investors and partners.
• Conduct thorough market research to understand market trends, consumer preferences, and the needs of your target market.
• To ensure efficient daily operations, provide in-depth operational plans that incorporate staffing, additional services, and customer service.
• Create realistic financial projections for sales revenue, expenses, and profit forecasts while considering contingencies & emergencies.

Why do you need a SaaS business plan?

For entrepreneurs who jump into business directly without writing a business plan is like delaying their success. Here are some reasons why you need a SaaS business plan:

Writing a business plan helps you work out and make clear your business strategy. Do you want customers to pay upfront? Or maybe you’re thinking about the “freemium” idea where some stuff is free, but others need a paid upgrade. Writing this down from the start helps your team understand where you’re headed.

Finances are important

Sometimes, it takes months or even a year to cover customer acquisition costs. So, you need a plan with a solid financial forecast. A good plan lets you play with different situations, so you know how much money you need for both the long and short term.

Acquiring customers

A good business plan outlines how you’ll get new customers. It could be a detailed marketing plan included in your business plan or strategies for how to acquire customers.

Retaining Customers

Getting customers is just part of the game for a subscription business. SaaS businesses need to keep their customers coming back, especially in a competitive market.

Knowing Your Market

A business plan lets you identify your ideal customer profile. Knowing your customers is crucial, and having a deep understanding of your customers helps you make the correct updates to your product in the future.

What to include in your SaaS business plan?

1. executive summary.

The executive summary is basically an introduction to the entire business plan. Entrepreneurs prefer to write it at the last because till then, they will have the full knowledge of the business plan.

Start your executive summary by engagingly introducing your business, and include all other elements like

• Saas company brief introduction
• Market Opportunity
• Vision & mission statement
• Target market
• Your products and services
• Marketing strategy
• Management team
• Financial Outlook
• Call to action

For instance here is an example of Saas company’s product introduction with the help of Upmetrics:

Remember, your readers might not read the whole business plan, but they will definitely go through the executive summary. So, make sure to keep it simple and engaging.

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2. Company Overview

In the company overview section, introduce your business in detail. It includes legal structure, name, location, business history, and everything about your Saas company.

First, provide the basic details of your Saas business – what is the name and what type of Saas business do you own; for example, your Saas business might be:

• Horizontal Saas: This Saas business model allows Saas businesses to cater services to various customer segments.
• Vertical Saas: Here the solutions are created for a particular customer segment of the industry.
• Collaboration Saas: This type of Saas business allows teams to work together. They also enable document sharing, project management, communication, and more such functions.

After that, mention the owners of your Saas startup along with the qualifications. Add the mission statement of your business and do not forget to include business history (if any) & future goals.

This section should provide an in-depth understanding of your business and business owners.

3. Industry Analysis

In the industry analysis section of your SaaS business plan, it is essential to provide a comprehensive overview of the SaaS industry. While this may seem unnecessary, it gives you a deep understanding of your industry which will help you in business planning.

Here are certain questions that will help you in the analysis:

• What is the current size of the Saas industry in terms of revenue?
• What are the current trends of the Saas business?
• Who are the leading SaaS businesses in the industry?
• What is the growth forecast for the industry?

For example, look at this industry and the size of the Saas industry with the help of Upmetrics:

Conduction this industry analysis will educate you about the market and help you prepare marketing strategies according to the market trends.

In short, your industry analysis will provide a clear and comprehensive view of the SaaS market, helping you make informed decisions and easily communicate your business’s positioning and potential.

4. Competitive Analysis

Competitive analysis will help you understand your business better and identify the strong points of your product.

Start by specifying who are your competitors – both companies like yours (direct competitors) and other choices customers might consider (indirect competitors).

Now, let’s focus on your direct competitors, those similar to your SaaS service. Provide an overview of each competitor, including their size and where they’re based.

Next, look at their strengths and weaknesses. Find out:

• Which customer segment do they serve?
• What kind of software services do they offer?
• How do they price their services?
• What are their strengths and strong points?
• What do they need to work on, according to their customers?
• What is their customer acquisition cost?

A better way to conduct this analysis is by seeing things from a customer’s viewpoint. You might even ask your competitors’ customers what they like and dislike about them to better get insights about them.

This way you can get to know the unique selling proposition of your SaaS company. Think about all the areas where you will outperform your competition and make sure to include that in your strategies.

Your USP might be:

• Ease of use
• Customization
• Attractive pricing structure
• 24*7 customer support

In short, through this analysis get to know about your USPs and competitors.

5. Market Analysis

In this section, dive into the market where you will provide SaaS services.

Start your market analysis section by providing the details of your target customers. Your target market can be:

• Small to medium-sized businesses
• E-commerce retailers
• Enterprise level companies
• Nonprofits or NGOs

After mentioning your target market, give a detailed overview of the market size and growth potential of the industry. For example: here is the market size of wages and salary sales workers for a customer relationship management solutions provider software SaaS company:

Now focus on market trends too. Mention what your target customers prefer and what new are they looking for. For example, people might be looking for:

• Remote work solutions
• AI and machine learning integration
• Hybrid cloud solutions

At the end of the market analysis, do mention the regulatory environment your SaaS business needs to follow.

6. Product Offerings

After mentioning your target customers, give details of products that are supposed to make life easier for the target customers. So, make sure your products are easy to use and efficient.

Your product might provide one of these:

• Customer Relationship Management (CRM)
• Project Management (PM)
• Enterprise Resource Planning (ERP)
• Sales Funnel Management
• Financial Management
• Human Resources Management (HRM)
• Communication Solutions
• Automated Marketing Solutions

7. Sales and Marketing Plan

Writing the sales and marketing section means jotting down all the customer acquisition strategies and the tactics for how to retain them.

First, you need to identify and understand your target market, then need to know your USPs because these two elements will be at the base of all your strategies.

Now it is time to mention your customer acquisition strategy as in whether you will go for inbound acquisition or outbound acquisition.

Inbound acquisition

Inbound strategies are fully digital and are necessary to fully convert potential customers into existing ones.

They include acquiring customers or retaining existing customers with the help of content marketing, search engine optimization (SEO), social media marketing, email marketing, etc.

Outbound acquisition

Outbound strategies are all about going to the potential customers directly rather than waiting for them to come to you. This can only happen with a proper sales team by your side.

These strategies include cold emails, cold calls, LinkedIn outreach, direct mail, trade shows, etc.

Once you have noted down how you will acquire customers, then mention below things too:

• Customer acquisition cost
• How many customers do your salespeople close per month on average
• Your monthly paid advertisement budget
• Number of followers you have on social media

8. Management Team

Knowing who is behind your SaaS business will increase the appeal of your business plan.

The management team tells you about the people in charge of the SaaS business. It should explain each manager’s experience, what they’re good at, and what their jobs are.

Here is an example with the help of Upmetrics of how to mention your key managers:

Whether you are going for a traditional business plan or a modern lean plan, do not ignore mentioning your management team. 

9. Operations Plan

This part is like a map that shows how you will make your SaaS business work. It’s divided into two sections:

Everyday Work:

This is what you do every day to keep the business running. Like getting customers, helping them out, and dealing with paperwork. You have to explain how you’ll do all these daily tasks efficiently.

For example here is the purchasing procedure for CRM software with the help of Upmetrics:

These are the important things you want to achieve in the future. It could be reaching a certain number of customers, making a lot of sales, hiring more team members, or launching new features.

Here, you have to show your plan for reaching these goals, including when you aim to get there and what you’ll do to make it happen.

This operations plan is like a guide for handling your everyday tasks and making big dreams for the SaaS business come true.

10. Financial Plan

SaaS financial plan needs to have a 5-year financial forecast. For the first year, break it down into monthly or quarterly details, and then summarize it annually. This forecast should cover your income statement, balance sheet, and cash flow.

Income statement

An income statement, often known as a Profit and Loss statement or P&L, displays your earnings and then deducts your expenses to know the profitability of your business.

When crafting your income statement for SaaS sales growth, you have to make some assumptions. Here is an example of an income statement with the help of Upmetrics:

Balance sheet

Balance sheets display your assets and liabilities. Although they can contain a lot of details, like equity, goodwill, other intangible assets, etc.

Cash flow statement

Your cash flow statement helps you see how much money you need to start or grow your business and avoid running out of money.

Surprisingly, you can make a profit but still face financial problems that could lead to bankruptcy. Therefore, you will need proper cash flow planning to avoid such circumstances.

SaaS Industry Highlights 2023

• Growth forecast: The Software as a Service (SaaS) market was to hit $141.40 billion in revenue by 2023 and is expected to maintain a yearly growth rate (CAGR) of 5.64%, reaching a market size of $186.00 billion by 2028.
• USA’s growth: When compared on a global scale, the United States is expected to generate the highest revenue, reaching $141,400 million in 2023.
• User spending: Spending by end-users on SaaS was to reach $208.08 billion in 2023, making up 35% of all spending on end-user public cloud services.
• Leveraging AI: Around 40% of businesses were prepared to integrate AI technology into their operations in 2021, and the forecasted expansion of cloud AI in 2023 is expected to be five times greater than it was in 2019.

Download a SaaS business plan template

Ready to kick-start your business plan writing process? And not sure where to start? Here you go, download our free SaaS business plan pdf , and start writing.

This intuitive, modern, and investment-ready template is designed specifically for SaaS businesses. It includes step-by-step instructions & examples to help in creating your own SaaS business plan.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

Write your business plan with Upmetrics

With Upmetrics, you get easy-to-follow steps, templates you can adjust, over 400+ examples of business plans , and AI support to make your business planning simpler.

If you’re not great with financial formulas, Upmetrics helps you make accurate money forecasts for 3 years or more.

Whether you’re beginning a new business or trying to expand an existing one, Upmetrics is all you need to create a successful and pro-business plan that matches your goals.

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Frequently asked questions, where can i find a saas business plan template that investors will take seriously.

To secure funding and impress potential investors, an engaging SaaS business plan is necessary. Here are some resources from where you can find business plans:

• Business plan software
• Government website 
• AI business plan generators
• Consultants and advisors
• Business plan writers

How do I define my target audience in a SaaS business plan?

While defining the target audience of your SaaS company, you have to mention their:

• Demographics
• Physiographic
• Needs & pain points
• Purchasing habits
• Localization

What are common mistakes to avoid in a SaaS business plan?

Here are some common mistakes you need to avoid while you write a business plan:

• Not conducting enough market research
• Poor vision
• Not having proper financial projections
• Wrong pricing model
• Insufficient ROI analysis

What technical details should be included in a SaaS business plan?

Technical elements you should include in your business plan are:

• Technology stack
• Technology architecture
• Data storage and security
• Scalability
• APIs and integration
• Data backups & recovery

Should I focus on the short-term or long-term goals in my SaaS Business Plan?

SaaS businesses need to focus on both short and long-term goals as both are important to know your near and far future goals with financial projections and budget.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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SaaS Business Plan Template

Written by Dave Lavinsky

SaaS Business Plan

You’ve come to the right place to create your SaaS business plan.

We have helped over 10,000 entrepreneurs and business owners create business plans and many have used them to start or grow their SaaS companies.

Saas Business Plan Example

Below is a saas business plan template to help you create each section of your own business plan.

Executive Summary

Business overview.

All In One is a startup B2B SaaS company located in Los Angeles, California. The company is founded by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Now, Melissa is ready to venture out with her own SaaS platform. As the name implies, All In One will be a one-stop-shop SaaS platform to help enterprises of all sizes to streamline their saas business operations.

Melissa has enlisted the services of a software developer, Paul Smith, to be the Chief Technology Officer of the company and manage the technical aspects of the SaaS platform. Melissa plans on recruiting a small team of highly qualified professionals to help manage the day to day tasks of running a SaaS company including sales and marketing, customer support, financial reporting, and technology maintenance and optimization.

All In One will provide a comprehensive array of SaaS services beneficial to any business owner who wants to improve their efficiency. All In One will allow each client to ensure that every aspect of their enterprise is being managed seamlessly. All In One will be the ultimate choice for B2B SaaS services while being the most user-friendly platform around.

Product Offering

The following are the solutions that All In One will provide:

• Customer Relationship Management (CRM)
• Project Management (PM)
• Enterprise Resource Planning (ERP)
• Sales Funnel Management
• Financial Management
• Human Resources Management (HRM)
• Communication Solutions
• Automated Marketing Solutions

Customer Focus

All In One will target all small-to-medium (SMEs) and corporate businesses in the United States. They will target businesses in every industry and sector. They will also target companies that already use other SaaS platforms as well as companies brand new to SaaS solutions. No matter the client, All In One will deliver the best interface, customer support, and net profit.

Management Team

All In One will be owned and operated by Melissa Johnson. She has recruited an experienced software developer, Paul Smith, to be her Chief Technology Officer and help manage the SaaS technology.

Melissa Johnson is a graduate of the University of California with a Bachelor’s degree in Strategic Management. She has been helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow for over fifteen years. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a network of loyal clients.

Paul Smith has been a software developer for over a decade. He has a Software Development degree from New York University and has created a dozen successful software applications for B2B purposes. Melissa relies on Paul’s technical expertise and ability to transform her vision into an easy-to-use platform.

Success Factors

All In One will be able to achieve success by offering the following competitive advantages:

• Helpful, knowledgeable, and efficient sales and customer support team that will be available 24/7 to answer customer questions, help troubleshoot any issues that arise, and record feedback to improve the platform.
• Full suite of solutions to manage all aspects of business operations in one user-friendly, streamlined platform.
• All In One is an intuitive smart SaaS platform that learns the more it’s utilized, so each user can have a personalized experience that works best for them.

Financial Highlights

All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and outbound marketing costs. The breakout of the funding is below:

• UX design and software development: $100,000
• Office equipment, supplies, and materials: $10,000
• Three months of overhead expenses (payroll, rent, utilities): $120,000
• Marketing and Customer Acquisition Costs: $10,000
• Working capital: $10,000

The following graph below outlines the pro forma financial projections for All In One.

Company Overview

Who is all in one.

All In One is a newly established B2B SaaS company dedicated to helping businesses of all sizes achieve optimal efficiency in their operations through technology. All In One is based in Los Angeles, California, but will be available to companies across the United States. All In One will be the most reliable, user-friendly, and efficient choice for business owners of small-to-medium enterprises (SMEs) and large corporations in any industry. All In One will provide a comprehensive menu of SaaS solutions for any business owner to utilize. Their full-service approach includes a comprehensive set of sales and marketing, project management, human resources management, and customer relationship management solutions all in one easy-to-use platform.

All In One History

All In One is owned and operated by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a loyal client base.

Since incorporation, All In One has achieved the following milestones:

• Registered All In One, LLC to transact business in the state of California.
• Has a contract in place to lease a small office space.
• Reached out to numerous contacts to include former clients and business owners to begin getting beta users for the new platform.
• Began recruiting a small team of sales and marketing associates, customer support associates, an accountant/bookkeeper, and a technology officer.

All In One Services

Industry analysis.

The global SaaS industry is valued at an estimated $152B (USD). The market is expected to grow to $208B by the year 2023. According to Statista, there are over 15,000 SaaS companies in the U.S. The largest industry players include Adobe, Microsoft, and Salesforce.

SaaS is a major component of cloud computing. Businesses rely on SaaS for everything from video conferencing to sales and marketing automation and customer relationship management. As more companies grow to depend on these services, demand for SaaS offerings will continue to increase. Industry trends include an increased use of artificial intelligence, big data, and integrated cloud services.

The market is highly fragmented with many companies offering similar services. Industry operators can achieve a competitive advantage by developing recognizable and memorable branding and marketing campaigns, providing exceptional customer support, and offering value-add services in addition to the SaaS platform itself.

Customer Analysis

Demographic profile of target market, customer segmentation.

All In One will primarily target the following customer profiles:

• Small-to-medium enterprise (SME) business owners in any industry/sector.
• Corporate/enterprise businesses in any industry/sector.
• Business owners who are looking for a better SaaS platform than what they are currently using.
• Business owners who have never used Saas, but would like to get started to improve their operational performance.

Competitive Analysis

Direct and indirect competitors.

All In One will face competition from other saas businesses with similar business profiles. A description of each competitor company is below.

Get Customers: Sales and Marketing SaaS

Get Customers provides a SaaS platform catering to businesses of any size. The company’s main offering is for automated sales and marketing solutions, but they have recently branched out to offer more comprehensive services including human resource, customer relationship, and financial management tools. Based in Seattle, Washington, Get Customers offers its solutions to businesses and organizations across the United States.

Get Customers’ promise is to deliver a reliable SaaS solution, effective communication, honesty and integrity, and 24/7 availability of the customer support team. Get Customers’ team of experienced SaaS developers and business professionals assures the platform will allow the business operations of its clients to be run smoothly, freeing the business owners from day-to-day operational hassles.

Competitive SaaS Solutions

Competitive SaaS Solutions is a Los Angeles-based B2B SaaS company that provides outstanding business solutions for small business owners. Competitive SaaS Solutions takes the headache out of dealing with multiple SaaS platforms that are not always compatible. They provide comprehensive SaaS services in one place. SaaS solutions included in the platform are CRM, HR, PM, ERP, automated marketing, financial reporting, and video conferencing. The owners of Competitive SaaS Solutions are seasoned business owners and technology professionals so they understand how SaaS is best built, implemented, and managed.

Better Built SaaS

Better Built SaaS is a trusted B2B SaaS company that provides superior service to businesses of all sizes. They are able to provide a one-stop shop for business owners who are interested in optimizing their operational processes through automation. Better Built SaaS is able to serve new businesses and startups from the beginning and established corporations looking to improve their profit margins. They are also able to ease the stress of managers who are overwhelmed by the day to day hassles and complexities that come with running a business.

Their pricing structure is simple and straightforward. Better Built SaaS offers three pricing tiers for their services – the Basic Plan, the Premium Plan, and the Comprehensive Plan. Business owners can choose the plan that best suits their needs and change their plan at any time.

Competitive Advantage

All In One will be able to offer the following advantages over their competition:

• Helpful, knowledgeable, and efficient customer support team that will be available 24/7 to answer customer questions and troubleshoot any issues that arise.
• An intuitive platform that works for any business size in any industry.
• Comprehensive solutions that can be customized to best fit each client’s needs.

Marketing Plan

Brand & value proposition.

All In One will offer the unique value proposition to its clientele:

Promotions Strategy

The promotions strategy for All In One is as follows:

Word of Mouth/Referrals

Melissa Johnson has built up an extensive list of contacts over the years by providing exceptional service and expertise to her clients. Many former clients have communicated to Melissa that they are interested in signing up for the new SaaS and are happy to help spread the word of All In One to their network. Additionally, All In One will use a customer referral program and provide existing clients with discounts for referring new clients.

Website/SEO Marketing

All In One will recruit an in-house marketing director to design and maintain its website. The website will be well organized, informative, and list all their services that All In One is able to provide. The website will also list customer support contact information, pricing plans, and demo videos.

The marketing director will also manage All In One’s website presence with SEO marketing tactics so that any time someone types in the Google or Bing search engine “B2B SaaS company” or “SaaS business solutions”, All In One will be listed at the top of the search results.

Social Media Marketing

All In One will use social media platforms including TikTok, YouTube, Twitter, Instagram, LinkedIn, and Facebook to promote the brand and attract customers. The company’s in-house marketing director will oversee the social media implementation.

Content Marketing

The company will use content marketing on its website and social media to help drive traffic and convert customers. Content will be high quality, informative, and keyword optimized.

The pricing of All In One will be moderate and on par with competitors so customers feel they receive value when purchasing their services.

Operations Plan

The following will be the operations plan for All In One.

Operation Functions:

• Melissa Johnson will be the Owner and CEO of the company. She will oversee all customer support staff and manage client relations. Melissa has spent the past year recruiting the following staff:
• Paul Smith – Chief Technology Officer who will provide all technical support for the platform.
• Bill Brown – Accountant/Bookkeeper who will provide all client accounting, tax payments, and monthly financial reporting.
• Kelly Jones – Marketing Manager who will work on all sales and marketing initiatives for All In One, including customer acquisition.

Milestones:

All In One will have the following milestones complete in the next six months.

8/1/2022 – Finalize contract to lease the office space.

8/15/2022 – Finalize personnel and staff employment contracts.

9/1/2022 – Complete software development of the platform.

9/15/2022 – Begin networking and outbound marketing efforts.

9/22/2022 – Begin moving into the office.

10/1/2022 – All In One opens for business and launches the beta platform.

Financial Plan

Key revenue & costs.

The revenue drivers for All In One are the SaaS subscription fees that will be charged to the clients for use of the SaaS platform and services. All In One will have a tiered subscription model with a basic, standard, and premium subscription options. In addition, the company will have customized service options for an additional fee.

The cost drivers will be the overhead costs required to maintain a SaaS platform and staff the office. The expenses will be the payroll cost, rent, utilities, office supplies, and marketing materials.

Funding Requirements and Use of Funds

All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and marketing costs. The breakout of the funding is below:

• Marketing and customer acquisition costs: $10,000

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

• Average number of monthly subscriptions: 15
• Average fees per month: $50,000
• Office lease per year: $100,000

Financial Projections

Income statement.

Balance Sheet

Cash Flow Statement

SaaS Business Plan FAQs

What is a saas business plan.

A SaaS business plan is a plan to start and/or grow your SaaS business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your SaaS business plan using our SaaS Business Plan Template here .

What is the Main Type of Saas Business?

There are a number of different kinds of SaaS, some examples include: Horizontal SaaS and Vertical SaaS.

How Do You Get Funding for Your SaaS Business Plan?

SaaS are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.  This is true for a business plan for any Saas company, including a B2B Saas business plan.

A well crafted Saas business plan is essential for securing funding from any type of potential investor.

What are the Steps To Start a SaaS Business?

Starting a SaaS business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Write A Saas Business Plan - The first step in starting a business is to create a detailed Saas business plan that outlines all aspects of the venture. The business plan should include market research on the Saas industry and potential target market size, information on the services or products you will offer, marketing strategies, pricing details and a solid financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your Saas business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your Saas business is in compliance with local laws.

3. Register Your SaaS Business - Once you have chosen a legal structure, the next step is to register your Saas business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your SaaS business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where your saas business will be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary SaaS Equipment & Supplies - In order to start your SaaS business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your SaaS business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.

SaaS Business Plan Template

Written by Dave Lavinsky

SaaS Business Plan

Over the past 20 years, we’ve helped over 10,000 entrepreneurs create successful SaaS (Software as a Service) business plans. This step-by-step guide will show you how to start and grow your SaaS business. You’ll learn how to make a plan that outlines your business idea, target customers, customer acquisition strategy, revenue model, and expenses. Let’s get started on building your SaaS company today!

Download our Ultimate SaaS Business Plan Template here >

What is a SaaS Business Plan?

A traditional business plan provides a snapshot of your SaaS business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your customer acquisition strategy for obtaining new clients. It also includes market research to support your business concept.

Why You Need a Business Plan for a SaaS Company

Having a comprehensive business plan is a critical step for any SaaS startup or company looking to scale. It acts as a roadmap, guiding the development and growth phases by setting clear, actionable objectives. A well-structured business plan not only helps in aligning the organizational activities towards achieving business goals but also plays a pivotal role in securing funding. Investors and lenders often require a detailed business plan to understand the potential of your SaaS business before committing their resources. Additionally, a business plan enables you to anticipate challenges and plan effective solutions in advance, thereby reducing risks and increasing the likelihood of success.

Here are several key reasons and benefits for creating a comprehensive business plan for a SaaS startup or an existing company:

• Helps Secure Funding : A solid business plan is essential for attracting potential investors and securing loans.
• Guides Decision Making : It serves as a blueprint for making informed decisions and navigating your business towards its goals.
• Facilitates Growth : Helps in identifying growth opportunities and outlining strategies to capitalize on them.
• Reduces Risks : By anticipating potential challenges, a business plan allows for the development of contingencies to mitigate risks.
• Enhances Understanding of Market : Through research, it provides insights into the competitive landscape and customer needs.
• Improves Communication : Acts as an effective tool to communicate the vision and strategy of your SaaS business to team members and stakeholders.

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How to write a business plan for a saas company.

Your SaaS business plan should include the following 10 key elements:

Executive Summary

• Company Overview

Industry Analysis

Customer analysis, competitive analysis, marketing plan, operations plan, management team, financial plan.

Your executive summary provides an introduction to your SaaS business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of SaaS business you are operating and the status; for example, are you a SaaS startup, or do you have an existing business that you would like to grow?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the SaaS industry. Discuss the type of SaaS you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing strategy. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of SaaS you are offering.

For example, you might offer the following options:

• Horizontal SaaS – This SaaS business model allows big SaaS businesses to serve a varied customer base from a multitude of industries. Services can be expanded to incorporate a variety of software categories.
• Vertical SaaS – This business model includes solutions that are created for a specific customer type of industry. This software focuses solely on that industry’s needs.

In addition to explaining the type of SaaS you provide, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What is your mission statement?
• What milestones have you achieved to date? Milestones could include usability goals you’ve reached, number of new subscriptions, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

The Software as a Service (SaaS) industry in the United States is a significant and rapidly growing sector. As of 2023, the market value of the SaaS industry in the U.S. is approximately $108.4 billion . This industry is expected to continue its growth trajectory, with projections indicating that it could reach a market value of $225 billion by 2025, solidifying the U.S. as the world’s largest SaaS market.

In your industry analysis, you need to provide an overview of the SaaS industry. While this may seem unnecessary, it serves multiple purposes.

First, researching the SaaS industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your business strategy particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your SaaS business plan:

• How big is the SaaS industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your SaaS service? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

The customer analysis section must detail the customers you serve and/or expect to serve. This includes identifying your target market and their characteristics such as age, income, location, etc.

By using customer segmentation techniques, you can further refine your target market and tailor your marketing efforts to specific groups of customers. Examples of segmentation in the SaaS industry may include the following customer segments:

• Small and medium-sized businesses
• Enterprises
• Startups/entrepreneurs
• Non-profit organizations

It’s essential to have a deep understanding of the needs, pain points, and preferences of your target audience. This knowledge will help you develop a product that meets their specific requirements and effectively market your SaaS solution.

In addition to demographics, you should also consider the psychographics of your target market, such as their behavior, values, and lifestyle. This information can give you insights into how to position your product and messaging to resonate with potential customers.

Conducting customer surveys and market research can be helpful in gathering this data. You should also analyze your competition’s customer base to identify any gaps or opportunities within the market.

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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other SaaS services that offer similar features and target the same market segments as your product. Understanding these competitors involves analyzing their product offerings, market position, strengths, and weaknesses. This analysis will help you identify opportunities for differentiation, allowing your SaaS solution to stand out in a crowded market.

Indirect competitors are other options customers may use that aren’t direct competitors. This includes customized software solutions and open-source software. You need to mention such competition to show you understand that not everyone who needs software will subscribe with a SaaS company.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• How many customers do they serve?
• What types of software do they offer?
• What is their pricing strategy (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of this section is to document your competitive advantages. For example:

• Will you provide superior products?
• Will you provide services that your competitors don’t offer?
• Will you make it easier or faster for customers to use your products?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Traditionally, a detailed marketing plan includes the four P’s: Product, Price, Place, and Promotion.

This section should include the following:

Product : in the product section, you should reiterate the type of SaaS business that you documented in your Company Analysis. Then, detail the specific solutions you will be offering. For example, in addition to Customer Relationship Management solutions, will you also offer Email Marketing solutions?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place : Place refers to the location of your SaaS company. Document your location and mention how the location will impact your success. For example, is your SaaS production or support office located in the US or in India, etc. Discuss how your location might impact customer attraction or retention.

Promotions : the final part of your SaaS marketing plan is the promotions section. Here you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider in your marketing mix:

• Search Engine Optimization (SEO)
• Advertising in trade magazines
• Reaching out to associations that correspond with the industry or industries you are targeting
• Publishing articles or writing guest posts on relevant blogs
• Social media marketing
• Radio and/or TV advertising

Understanding and Managing Customer Acquisition Cost (CAC) In the SaaS industry, the Customer Acquisition Cost (CAC) directly impacts profitability and long-term success of your business. Customer acquisition costs are the total cost of the sales and marketing plan that is needed to acquire customers. To keep this cost low, companies should focus on:

• Efficient marketing strategies like inbound marketing, which attracts customers through content creation, social media, and SEO.
• Leveraging customer referrals by incentivizing existing users can significantly reduce acquisition costs, as satisfied customers are likely to spread the word.
• Implementing a robust customer relationship management system to nurture leads and personalize the customer journey can also increase conversion rates, thereby lowering the overall CAC.

By focusing on these strategies, SaaS businesses can optimize their spending and improve their return on investment in customer acquisition efforts.

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your SaaS business, such as attracting customers, running the customer helpdesk, processing paperwork, etc.

Long-term goals are the milestones you hope to achieve using key metrics. These could include the dates when you expect your 100th subscription, or when you hope to reach $X in sales revenue. It could also be when you expect to hire your Xth programmer, or when you expect to launch a new solution.  

To demonstrate your SaaS business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

• Upper Management – In this section, introduce your CEO and other top-level executives. Detail their experience in the industry, leadership skills, and any relevant achievements.
• Development Team – Describe the members of your development team and highlight their technical expertise and any previous successes related to SaaS or software development.
• Sales Team – Introduce your sales team members, emphasizing their experience with SaaS products and their track record of generating sales.
• Support Team – Detail the members of your customer support team, highlighting their knowledge of your SaaS solution and their ability to provide excellent customer service.

By showcasing a strong and well-rounded management team, you not only demonstrate the potential for success but also instill confidence in potential investors or partners.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in software development or deployment, and/or successfully running small businesses.  

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have 10 enterprise subscribers or 500 individual subscribers? And will subscriptions grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on building out your SaaS solution, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a $100,000 customization contract that would cost you $75,000 to fulfill. Well, in most cases, you would have to pay that $75,000 now for employee salaries, hosting, utilities, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an SaaS business:

• Location build-out including design fees, construction, etc.
• Cost of equipment like computers, design and project management software, etc.
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office design blueprint or location lease.  

Free Business Plan Template for a SaaS Business

You can download our free business plan template PDF . Our sample SaaS business plan is another free resource to help you get started on your own SaaS startup business plan.  

SaaS Business Plan Summary

Putting together your own business plan will improve your company’s chances of success. The business planning process will help you better understand your target audience, your competition, and your business strategy. You will also develop the marketing strategies needed to better attract and serve your target market, an operations plan to focus your efforts, and financial projections that give you business goals to strive for and keep your company focused.

Growthink’s Ultimate SaaS Business Plan Template allows you to quickly and easily complete your Saas Business Plan.

Sources of Funding for SaaS Businesses

With regards to funding, the main sources of funding for a SaaS business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a SaaS business is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan.

Additional Resources For SaaS Business Owners

• SaaS Marketing Strategies
• SaaS Pricing Strategies To Consider
• SaaS Accounting: Finances For A Subscription Model Company

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

Other Helpful Business Plan Articles & Templates

How to Build a SaaS Financial Model in 7 Steps: 2024 Guide

Mastering the Art of SaaS Financial Modeling: From Forecasting to Decision-Making

A SaaS financial model is a spreadsheet based on past data about a startup and a set of assumptions. It’s used to forecast a SaaS startup’s financials, such as recurring revenue, churn, expenses, etc. Every business has a good use for a financial model template unless the owner isn’t aware. In this post, we’ll learn how to build a SaaS financial model for startups and established businesses alike.

Why SaaS Startups Need a Financial Model

SaaS startups and businesses have many KPIs (key performance indicators) that influence finance decisions, helping to mitigate risks, raise investment capital , price new products or services, etc.

A SaaS financial model provides information on these KPIs , including the following:

• Monthly Unique Visitors
• Product-Qualified Leads (PQLs)
• Viral Coefficient
• Conversion Rate to Customer
• Customer Retention Rate
• Monthly Recurring Revenue (MRR)
• Number of Support Tickets Created
• Average Resolution Time
• Customer Acquisition Cost (CAC)
• Net Promoter Score (NPS)
• Number of Active Users
• Organic vs. Paid Traffic ROI
• Customer Lifetime Value (LTV)
• Qualified Lead Velocity Rate (LVR)
• Product Signups
• Average First Response Time

How to Build a SaaS Financial Model in 7 Steps

You should build a large SaaS financial model covering much of what you can learn about your business. The design should be modular, meaning it should contain several smallar models that are interlinked and can exist independently. Also, build your model such that you needn’t change its underlying structure or fundamentals when working with different data sets — this will save you time building new financial models for every forecast and help your SaaS financing campaigns.

In summary, here’s how to build a SaaS financial model from scratch in seven simple steps:

• Collect all necessary business data.
• Build a three-statement financial model.
• Form a problem statement (what it forecasts).
• Decide who the model is for.
• Specify what drives your forecast.
• Sketch a rough layout for inputs, processing, and output.
• Decide how to display the results.

If you don’t want to go through these steps, you can download our SaaS financial model template and use it to build any forecast about your business.

1. Collect all necessary business data.

Every financial model needs data for the input sections; there’s no financial model without accurate data. A SaaS startup without sufficient records would have to derive these data from market research and logical assumptions. However, you’ll need to improve the model as real data becomes available over time.

2. Build a three-statement financial model.

The three-statement model is the source that all subsequent models feed into. It’s called a three-statement financial model because it outlines key performance indicators (KPIs) for all kinds of SaaS startups based on three financial statements, including the following:

• The Income statement
• The balance sheet statement
• The cash flow statement

3. Form a problem statement (what it forecasts).

There are many things you’d want to forecast for a SaaS business. Make sure to include all forecasts in your model; otherwise, you’ll be forced to build new ones after completing your main design. You can design models forecasting subscriptions, recurring revenue, churn, signups, conversions, website visits, and more.

All these forecasts can be part of a larger model. Anytime you want to forecast churn, you only have to click on or select the churn sub-model. This is why a well-planned layout is critical for an all-encompassing SaaS financial model.

A SaaS financial model in Excel is usually good for such large designs. If you throw things around anyhow in your model, obtaining specific forecasts will be difficult and time-consuming. The model will also be more prone to errors and likely won’t convince investors to put money into your startup. Our fundraising and pitch deck building course offers insights into those parts of a financial model to focus on when seeking investment capital.

4. Decide who the model is for.

Models with a collection of different forecasts may be useful to different employees and partners. We’ll explain how below.

Models tracking your ad performance would make more sense to your marketing leader than investors. Even if you design a large, exhaustive model, you must find ways to present only what your audience wants. For example, investors would want to see your SaaS cash flow model, income statement, and balance sheet before investing in your business.

You can send the same all-encompassing model to your advertising manager and accountant but with clear instructions on finding what they’re looking for that’s relevant to their field. So it’s essential to list all who’ll use it and ensure everything they need is in the model, including how or where to find them.

Even if you intend to design a single-forecast model, it’s crucial to map out all its users, what they need, and what calculations or vocabulary they can understand. This will save you the trouble of educating them on these models, making fundamental changes to the model, or even designing a new one whenever you need a SaaS revenue forecasting for your business.

5. Specify what drives your forecast.

No matter your model’s size or complexity, it can’t accurately predict the future. Accuracy isn’t the purpose of a model; its primary goal is to give you a good idea of what will happen in the future. However, for that idea to be good enough for decision-making and pitch deck design , it must be derived from a complete model that uses accurate data and logical assumptions.

A complete model accounts for all critical components or drivers. The best approach is to include only the minimum number of drivers or factors to minimize the size and complexity of your model — this will keep things easy to follow, audit, and update. A minimalist model is easier to use, especially for people who didn’t partake in the model building. 

So, if you want a model that forecasts churn, you need to include the following drivers in your input within a selected timeframe:

• Number of new subscribers
• Number of total subscribers
• Cancelled subscriptions
• Website visits
• Engagement rate
• Ad performance

6. Sketch a rough layout for inputs, processing, and output.

Sketching a rough layout before building your model will speed up your work and help you avoid errors. It has the same effect as charting an outline for an article. It’ll help to organize and streamline the design process.

This is especially important for a SaaS startup model, which should focus on different outcomes. Our SaaS startup financial model template has the perfect layout because we planned it well before starting to build the template.

All financial models have at least three sections—input, output, and processing—and you must plan them individually. Brainstorming your model’s hierarchy will produce a coherent, easy-to-follow, audit, and complete model. The components of your model should be placed on top of each other such that understanding or populating one simplifies the next.

7. Decide how to display the results.

Will you display calculation results on the same sheet for all forecasts?

Don’t forget that your model may show projections for subscriptions, sign-ups, churn, recurring revenue, etc., simultaneously.

You need to decide whether these results display in the same place or on separate sheets. Mapping different forecasts to different sheets is better for simplicity and clarity. This prevents other results from distracting you while you’re studying one.

Using a SaaS Financial Model Template in Excel

We know that following our guide on building a financial model for SaaS isn’t easy — not that the guide itself is hard to understand, but implementation is the problem, especially if you aren’t a trained financial analyst . On the bright side, you don’t have to master the design skills yourself to use a great SaaS financial model in Microsoft Excel. We have a complete financial model template you can use for all your forecasts — all you have to do is download the template and populate it with your company data to produce your desired result.

Building a SaaS Financial Model in Excel

Microsoft Excel is a popular tool for building SaaS financial models. It’s the business analytical tool with the best capability. Suffice to say, there’s no financial model you can’t build in Excel.

However, it’s more complex than other analytical software tailored to businesses. To build your SaaS financial model in Excel, you must master the software to an advanced level.

Acquiring a certificate in Excel isn’t necessary. All you need is the essential skill of working in Excel and the ability to research formulas and processes.

SaaS Startup Financial Model Template

This template differs from a typical SaaS financial model template because data is typically obtained from secondary sources and assumptions. Many startups don’t have the data to build financial models as they’re still new businesses with hardly any customers. Yet, they need financial models to secure SaaS funding or plan business strategies.

Frequently Asked Questions

What is the 3-statement model for a saas company.

The 3-statement model for a SaaS company is a spreadsheet containing three sub-models or statements, including the income statement, balance sheet statement, and cash flow statement. The income statement displays the company’s profits and losses over a specific period; the balance sheet compares the company’s assets to its liabilities (debt and equity); and the cash flow statement maps out the movement of cash in and out of the SaaS business.

What is the financial model of a SaaS company?

The financial model of a SaaS company is a spreadsheet in Microsoft Excel, Google Sheets, and similar applications that forecasts a particular aspect of the business. The financial model of a SaaS company differs from that of traditional businesses due to recurring revenues and churn. This is why a typical SaaS financial model contains several forecasts.

How to do financial projections for SaaS startups?

You can do financial projections for a SaaS startup by using secondary data and logical assumptions. A startup usually doesn’t have sufficient data for a model. Data must be generated or triangulated from outside sources.

How do I start building financial models?

You can start building a financial model by defining the problem it’ll solve and those who’ll use it. You must list all the critical factors that influence the feasibility of the model and find ways to calculate other factors from your raw data.

We hope you now have a good idea of how to build a SaaS financial model. However, this article isn’t intended to teach you everything about building a SaaS financial model; no one can teach you to build a financial model in just one article. So, we’ve prepared a detailed course to groom you into a world-class financial analyst that can build any financial model. You can join the course or download our financial model template with all the instructions and start using this powerful tool in your SaaS business today.

Maximilian Fleitmann is a passionate founder and entrepreneur. For the last 12+ years he has successfully launched several businesses in the areas of education and digitalization. Max purpose is to enable growth and therefore he shares his experience in building startups.

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SaaS Marketing

SaaS is a hectic industry. It’s an ever-growing, straight-talking, constantly innovating world of solutions that help people and businesses do better, every day. That’s why we love it.

And if you’re an entrepreneur, you’ll also love the fact that it’s a market worth billions of dollars that is literally taking over the world.

Perhaps you have an idea for a SaaS product, and you’re looking for resources to help you put your ideas into action and get the wheels turning. It’s been a crazy year, but technology is still moving and you don’t want to get left behind.

We’ve put together some helpful SaaS business strategies, plans, and advice to help you with setting up your business and planning the scale-up journey.

Let’s get started.

Define: SaaS Business

SaaS (software as a service) products play an important role in our personal and professional lives.

It’s a market worth $105 billion in the US alone and it grows by 30% each year . If you’re an ambitious entrepreneur, that’s all you need to hear.

SaaS businesses stretch across all industries, from music to team management to healthcare, so you’ll find innovative software solutions in every specialized sector and niche.

So, how do we know something can be classed as software as a service?

SaaS is a software product that…

• Is accessed via an online platform or app
• Solves a particular problem
• Targets a particular group of people
• Uses a subscription model

We have cloud computing to thank for the evolution of SaaS businesses.

It’s a simple concept nowadays – software is stored and maintained in the cloud, and businesses pay for access to this software.

But it’s taken some serious technological advancement to get here, a point where high-performance software is readily available to anyone with an internet connection.

I’ve got a simple (maybe too simple) analogy for explaining SaaS businesses compared to other, older, methods of software use. You can use it when your parents ask you why you’re moving out of their cup noodle-littered basement and into your super yacht.

Let’s say you want a pizza. Because let’s be honest, everyone wants a pizza, all of the time. I’m so hungry, man.

You have two options:

• Planting some wheat
• Picking up the phone

You could buy a farm. You plant all your crops and take care of all your livestock. You harvest the grains, store them, and grind them to make flour. Etcetera. You now have all the ingredients required to make a pizza – all from your own premises. This is like “On-Premise” software. It’s installed, stored, maintained, and run on-premises.

You could also call your local pizza place, order your favourite – Hawaiian, obviously – and enjoy a delicious pizza within half an hour. The quality is always good, you don’t have to know anything about yeast, and it’s pretty cheap.

This is SaaS. Fresh, hot, Hawaiian pizza, delivered to your device.

SaaS Vs. Legacy Systems

Businesses in every industry, if they weren’t already built with cloud-based software, are making the switch to SaaS from traditional legacy systems.

To your average business owner, particularly if they’re a boomer, legacy systems are what they’ve always known.

It’s a scary thing to learn that all data is now stored in ‘the cloud’, but they’re starting to realize that competitors are moving faster because they’re using more modern tools.

Take wealth management, for example. It’s an old industry and it’s often run by older people (who are very good at what they do and have decades of experience).

The thing is, a shocking amount of wealth management takes place using clunky, ancient legacy systems (I’m talking about the software, not the people).

Heck, billions of dollars in assets might be tracked using a mission-critical spreadsheet. Let’s say old wealth manager Joe presses the wrong button in Excel – beep boop, he’s lost his client’s data.

This is where SaaS businesses save the day. When presented with the pros and cons, it’s a no-brainer:

In every industry – banking, beauty, education, finance, music, travel – SaaS businesses are riding the wave of cloud computing to offer businesses (and consumers) a far more advanced tool that is much simpler to use and, critically, far cheaper to run.

So, Mr/Ms. Entrepreneur, what kind of SaaS are you going to sell?

What Is Your SaaS Business Going To Look Like?

When mapping out a SaaS strategy for your startup, there are some fundamental parameters that should be in place.

• Solving a specific problem
• Catering to an audience you know and respect
• Pricing that demonstrates value

Your SaaS product is only going to be valuable if it solves a real, tangible problem for people. A problem that is so crucial that the solution is an urgent requirement.

At the most basic level, your SaaS business should be selling a product that helps other businesses make money.

Then there’s the audience for your SaaS business. You’ll get the best results from targeting a group of people that you know very well and, most importantly, that you respect.

Why? Because, if you want to succeed, you’re going to have to talk to them. A lot.

Now, price is obviously an essential factor because that’s how you make a seamless transition from your current clunker to a golden lamborghini. But it’s also how people perceive the value of your product.

If your product is valuable enough, if it truly solves a problem and helps businesses make money, they’ll be willing to pay for it.

Creating Your SaaS Business Plan

Okay, so you’ve got the concept for your SaaS business, you might have even started to dabble in development.

But you’ve got to get investors on board. To do that, you need a clear SaaS business plan that’ll persuade even the meanest dragon in the den that your product is the one.

SaaS Startup Business Plan: Traditional Vs. Lean

When you approach creating a business plan, you’ve got two options:

• Traditional Business Plan
• Lean Business Plan

A traditional business plan is a full-scale, 40-odd page manifesto that covers the following essential aspects of your SaaS business.

By the end of it, you’ll have a very serious-looking document that’ll have you feeling like a very serious business person.

The thing is, this is quite an old school method of business planning that doesn’t suit the environment where SaaS thrives.

In this industry, the entire market will shift, new competitors will emerge, new technologies will be invented, all in the time it takes you to write a 50-page document to send to Peter Jones.

So how do SaaS businesses plan their growth strategy without pinning themselves down? A Lean business plan.

Why A Lean Business Plan Suits SaaS Businesses

You’ll still need to cover the essentials, but there’s more wiggle room around areas that are constantly changing in the SaaS world.

Lean SaaS Business Plan Template

As well as your SaaS business plan, you need to provide two things:

• Clear vision and goals
• Assurance of profitability

Showing clarity and decisiveness around your business goals not only gives your business direction and momentum but impresses potential investors who will share your confidence in your SaaS business.

Of course, confidence is all hot air without proof of profitability. Make sure you’ve defined a clear path to profit and know your numbers because that’s what it boils down to when gaining investors.

Understanding The SaaS Business Model

So, we’ve established that SaaS is not like other girls because it sits on the cloud and, instead of investing a ridiculous amount into on-premise tech, businesses pay a small fee to access the data on a subscription.

All the major hallmarks of selling a tech product go out the window with SaaS – no physical product, no end-user license, no infrastructure needed to host the software – just log in on a web browser and maybe an app download.

Therefore, the core business model of any SaaS business is recurring subscription fees.

One-off sales are no longer the goal, instead, the focus is on the lifetime value of a customer. There are a number of ways a SaaS business can grow to maximize revenue, such as up-selling, partnerships, and affiliate marketing, but the core moneymaker is the subscription.

This is where the value of your product is everything, and I’ll circle back to the essential ingredient – helping businesses make money.

Think of the top SaaS businesses out there right now: Salesforce, Monday, Zendesk

If your software product is valuable enough, a business will:

• Use it for vital business activity – from task management to CRM organization to selling products
• Start building processes around the program – so even if a competitor comes along, they’ll stick to what they’ve been using
• Become reliant on the service it provides
• Pay just about anything to continue using and benefitting from it

SaaS leaders have cracked this code – and you can too, but there are many challenges to overcome (and that’s if your product is decent).

The SaaS business model sounds relatively straightforward, but it comes with many challenges. Let’s go over them:

Yikes. No wonder 92% of SaaS startups fail . That super yacht looks so far away when you’re deep in the Valley of Death, running through the last of your capital, and desperately pitching to investors while sleeping on your friend’s couch.

Knowing Your SaaS Business Has Made It (Key Metrics)

So, how do you know if you’ve made it? What are the SaaS marketing metrics for success if you’re running a SaaS business?

Let’s run through them. You should know these figures off the top of your head when you’re approaching investors.

• Customer acquisition cost
• Monthly recurring revenue
• Average revenue per account
• Customer lifetime value
• Customer retention rate

Churn is the most powerful metric for measuring SaaS success.

Customers will inevitably unsubscribe, whether it’s because they’ve found a better solution, they can’t afford the subscription, or they simply no longer need your product.

To calculate churn for a specific period, simply divide the number of unsubscribed customers by the total number of customers.

If your churn rate is increasing each month, you know you’ve got a problem.

Customer Acquisition Cost (CAC)

This is a great indicator for profit.

Divide the total cost in marketing and sales by the number of acquired customers.

Monthly Recurring Revenue (MRR)

A simple way to predict incoming revenue so you know how you’re tracking, without taking into account fluctuations in churn and customer acquisition. Multiply the number of customers by the average revenue each month.

Average Revenue Per Account (ARPA)

The average revenue acquired from one client each month or year. Calculated by dividing the total MRR by the number of customers.

Customer Lifetime Value (CLV)

This one’s a bit more complicated, but it’s one of the most important SaaS business metrics to track. It represents the average amount of revenue you can squeeze out of customers for the amount of time they stay with your company. Multiply the average revenue per account by the percentage gross margin, then divide it by the average churn rate.

Customer Retention Rate (CRR)

This just shows how many customers have stuck to using your software over time, proving the success of your marketing efforts and the value of your product. Divide the number of customers currently using the software by the total number of customers at the start of the specific time period, then multiple by one hundred to get the percentage.

The Marketing Approach To SaaS

You’ve developed your SaaS business plan, you know it like Chewbacca knows the Millennium Falcon, and you’re ready to send that sh*t into hyperspace.

SaaS growth is serious business. Every SaaS company navigates it differently, but it tends to look like the following stages:

When it comes to growing your SaaS business, you need a killer SaaS go-to marketing strategy.

This is obviously our area of expertise, so we’ll share our top SaaS marketing strategies and show you how to tackle the challenge of attracting customers with marketing.

Build Your Audience First

To truly master SaaS marketing, you should be thinking about it right at the start of your startup journey.

Before you start perfecting and developing your MVP, we highly recommend you start investing in your marketing essentials, including:

• Social media profiles
• Email marketing campaigns
• Product demonstrations

We’re not suggesting you invest in an inbound marketing agency right at the start, that wouldn’t be wise at all, you need that early capital.

But simply investing time and some resource into your marketing essentials, particularly your website, helps you build your audience alongside product development.

This helps you achieve a number of things:

• Test your USP
• Increase awareness of audience pain points
• Establish a relationship with your ideal customers
• Develop your brand voice
• Build anticipation for your product launch

By keeping marketing in mind from day dot, you save yourself from crafting an entire brand personality at a time where your product is ready and marketing should just plug and play to get the results you want.

It might mean doing a fair amount yourself, from writing the odd blog to posting on LinkedIn and setting up a mailing list.

For example, this fintech startup has been publishing high-quality blog content on its beautiful website since way before they started scaling up this year.

This means that, by the time they hit the hyper-growth phase and customer acquisition skyrockets, they’ve got a goldmine of epic content ready to make sure none of that organic traffic goes to waste.

Outbound vs. Inbound SaaS Marketing

Okay, so you’ve figured out how to start a SaaS business. You’ve got your MVP ready to go, some investors on board, and it’s time to start building an online presence to attract customers.

You know this means marketing, and you know that costs money, but you’re unsure how to best use allocate your funds to maximize results. The last thing you want to do is throw all your marketing spend at an ineffective campaign.

When it comes to B2B SaaS marketing, you’ve got two methods:

• Outbound marketing
• Inbound marketing

Outbound marketing uses tactics that directly target your audience, reaches into their day to day world, and initiates a conversation.

Traditional forms of outbound marketing involve radio ads, infomercials and those insidious cold calls at dinner time that provoked your Dad to swear in your presence for the first time.

Today, outbound marketing is all about social media and Google Ads. Companies pay to have their content displayed in front of users who Google, Instagram, LinkedIn, or Facebook recognize as belonging to their target audience.

Outbound marketing had a bad reputation for being manipulative and too in-your-face, which says a lot about a society that is sick to death of looking at advertisements. I mean, 81% of people will close their browser due to a pop-up ad.

But outbound marketing can be useful for businesses, particularly startups who need some traction with their online presence. It’s a useful way to track ROI – you pay a certain fee and get a certain amount of engagements.

Then there’s inbound marketing. Inbound marketing tactics are subtle – where outbound deals in flashy fonts, inbound provides education, subtlety, and value.

Rather than selling your SaaS product outright, inbound marketing educates your audience about the product and topics relating to it – how it works, how it solves a problem they face, what they can achieve with it, why it’s better than other products, why they should care about it.

Rather than persuading people to ‘buy now’, inbound marketing methods seek to gently steer your audience towards your product and showcase it’s value – with the goal that they’ll know where to find you when they need the product.

The most powerful form of inbound marketing is SaaS content marketing – words that work wonders for your business.

Inbound marketing is highly valuable to B2B SaaS for numerous reasons:

• SaaS products require more explanation for people to understand their value
• B2B customers take longer to make decisions so need more to read
• B2B decisions require discussion so need well-researched content
• SaaS relies on recurring revenue so customers need consistent value from content

There are many SaaS inbound marketing examples out there, all of which demonstrate the long term ROI that comes from building a goldmine of valuable content for your audience.

What’s more, SaaS inbound marketing is far more strategic. Different tactics and types of content can be engaged to guide leads down the marketing funnel to the point where they make the decision to purchase.

The SaaS Marketing Funnel

In every B2B SaaS marketing and lead generation guide , you’ll learn about the marketing funnel.

Basically, the funnel maps out every stage in a buyer’s journey from just noticing your product, to buying it and raving about it.

At its most basic level, the B2B SaaS marketing funnel has three stages:

• Consideration

By taking the time and using your knowledge of your customer persona, buyer journey, and your product, you can create an inbound marketing strategy that leverages the right content to attract customers at each stage of the marketing funnel.

With a future-proof inbound marketing strategy and a team of SaaS marketing experts by your side, your scale-up journey can be supported by high-value content that takes care of new leads and turns them into sales.

Conclusion: Let’s Get Down To Business

Let’s face it, inbound marketing is a serious long-term investment. To build a goldmine of content to nurture your leads, you’re gonna need a serious amount of high-quality blogs, case studies, landing pages, and videos.

If you’re an entrepreneur who’s just figuring out how to start a SaaS business, you likely won’t be able to hire an inbound marketing agency for a little while.

But that doesn’t mean we can’t help out. We want to support entrepreneurs looking to take SaaS further with solutions that’ll shape the world we live in tomorrow.

That sounded pretty cheesy, but we mean it. If you’re putting together inbound marketing strategies for your SaaS startup, let’s talk .

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Chris Onyett

Chris is one of the managing partners at Roketto. His area of expertise is digital marketing and loves sharing and educating on topics like Google Ads, CPC bidding tactics, Google Analytics, and marketing automation. When Chris isn't in the office, he enjoys playing volleyball, mountain biking, and hiking with his American Eskimo.

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How to build a SaaS Revenue & Financial Model

• November 17, 2023

Are you building a financial model for a SaaS business? Or are you simply interested in how SaaS revenue model works?

In this article we explain you, step-by-step, how you should build a SaaS revenue model in Excel to calculate MRR , LTV and other SaaS metrics. Let’s dive in!

1. Forecast new users

SaaS revenue is a direct function of the number of users (or “Accounts” for B2B and software companies). Indeed, Monthly Recurring Revenue (MRR) is calculated as:

MRR = Users x Monthly Pricing

So, before forecasting your revenue, you need to calculate the number of users you will ‘acquire’ over time (the “new users”).

You have 2 options to do so:

SaaS financial model: Inbound growth

Users are a function of the number of visitors (to your website for instance) and a conversion rate. This approach is very common for B2C subscription businesses.

Inbound growth

New Users = Visitor traffic x conversion rate

For example, assuming you have a website with 10,000 visitors per month and a 3% conversion rate, you would “convert” 300 new users per month.

New Users = 10,000 x 5% = 300

SaaS financial model: Outbound growth

Here, users are a function of the number of Sales Reps you have and their efficiency (the number of users they convert per month). This approach is used by most B2B subscription startups and, more especially, enterprise SaaS businesses.

Note that with outbound growth we often refer to accounts instead of users. Indeed, accounts are businesses each with a certain number of users.

Outbound growth

New Accounts = Sales Reps x closings per Sales Rep

New Users = New Accounts x Users per Account

For example, assuming a Software company with 5 sales people each closing 10 new accounts per month, you would close 50 new accounts per month.

Now, assuming that each account has 30 users, you would convert 1,500 new users per month.

New Accounts = 5 x 10 = 50

New Users = 50 x 30 = 1,500

2. Split users per tier and billing cycle

Once we have calculated how many new users you onboard (or acquire) over time, we can segment them into the different subscription plans they choose.

Indeed, new customers will choose a plan when converting. Of course, you can assume that most customers choose a free plan (like a free trial) when signing up, and they upgrade later on as we will see in the next section.

Let’s assume you have 4 tiers as follows:

• Free : 40% new users
• Premium : 20%
• Corporate : 10%

This is how would look customer split when they convert:

3. Forecast active users

Now that we have forecasted new users over time, we need to calculate active users. Before we look at how to calculate it, let’s first explain the different user terms below:

• New users : the number of users you acquire in a given time period (a month for example)
• Net new users : the difference in the number of users from one month to the other
• Active users : the total number of users (who haven’t churned)

In order to calculate active users, we need to forecast users movements between the different subscription plans you offer. In other words, we need to calculate not only churn (users who leave), but those who upgrade and downgrade to different plans as well.

SaaS financial model: Net new users

Net new users is a very important metric that drives active users, and MRR of course.

Net new users is the difference in the number of users from one month to the other (per tier for example). Yet, the difference isn’t necessarily the new users coming in. Instead, the difference must take into account those who left (churn), the new users who just converted (new users) but also upsell and downsell.

Assuming we have 2 subscription plans Basic and Premium , the number of active users for the Premium plan is equal to:

Net New Users (Paid) =

New Users ( Premium ) + Upsell from (Basic) – Downsell to (Basic) – Churn ( Premium )

• Upsell : customers upselling to a more expensive plan. For example “Basic” users upgrading to the “Paid” plan
• Downsell : same as upsell but the other way around. For example “Paid” customers downgrading to “Basic”
• Churn : customers who cancel their plan and leave

Assuming you build a SaaS financial model with the following numbers in a given month:

SaaS financial model: Active users

Now that we have calculated net new users for each subscription tier, we can now obtain the total number of active users per tier as follows:

Active users (month 2) =

Net new users (month 1) + Net new users (month 2)

Using the same example above:

For example, this is how could look like a SaaS financial model with 4 subscription tiers:

4. Calculate MRR

Like for users, we recommend to calculate MRR for each component of revenue: New MRR, Upsell MRR, Downsell MRR and Churn MRR. This allows us to identify where MRR growth comes from (new and upsell), as well as areas of improvements (downsell, churn).

SaaS Financial Model: Net New MRR

Net new MRR is equal to:

Net New MRR =

New MRR + Upsell MRR – Downsell MRR – Churn MRR

Using the same example above, we have:

By calculating separately MRR we can now break down MRR and obtain the following chart:

SaaS Financial Model: MRR

MRR is easier to obtain, it’s equal to:

MRR = Active users x Monthly pricing

Unlike the MRR breakdown chart above, we can obtain here the MRR breakdown by the different user tiers instead:

5. Forecast Staff

Salaries are often the most important expense category for SaaS businesses. That is why building an accurate and flexible hiring plan is key:

• Accurate because you will need to list all the roles, their salaries and starting dates as accurately as possible in the foreseeable future (12 to 24 months usually)
• Flexible because if it can be cumbersome to list dozens, if not 100’s of roles (especially if you are forecasting 5 years) but also because it may difficult to assess how to scale your workforce in the outer years (anytime beyond 24 months usually)

For example, this is how could look like a hiring plan and salaries for a software company:

6. Forecast expenses 

For expenses other than salaries, list them and try to bundle them into categories. Usual expenses categories for SaaS / subscription businesses include:

1. Cost of Goods Sold (COGS)

• Payment processing expenses
• Hosting (and other tech infrastructure costs)
• Customer service (whether in-house or outsourced)

2. Sales, General & Administrative expenses (SG&A)

• Marketing: paid media, offline marketing, agencies fees, etc.
• Sales: sales commissions
• Other operating expenses : subscriptions, travel costs, office supplies, rent, etc.
• Other expenses: legal advisory, bank fees, miscellaneous, etc.

Note: we recommend adding relevant salaries to their respective expense category (for instance marketing team salaries under Marketing) for more clarity in your forecasts.

When forecasting expenses, you have 2 options, they can be either:

• Dynamically calculated: suitable for variable expenses (they will grow in line with a given metric, such as users, or revenue). It can be as simple as a given % of revenues for instance (payment processing fees), or more complicated (for instance, customer service can be estimated by using the number of customer service tickets, your customer service team efficiency and their hourly rate); or
• An input from you: suitable for fixed expenses (they don’t vary based on growth). They can be expenses such as bank fees, rent, etc.

7. Wrap it up

Once you have built your revenue and your expenses (including all the salaries in the hiring plan), you can easily build your profit-and-loss, cash flow statement and balance sheet. You can also easily calculate key metrics such as cost of acquisition, customer lifetime value, etc.

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A Full Guide to SaaS Financial Models - Template Included

SaaS financial models are documents that outline your SaaS business’s financial performance and projections for you and your investors. This can be challenging for entrepreneurs (and even some CFOs) because the SaaS business model poses unique challenges in terms of traditional financial modeling.

SaaS poses challenges like:

• Recurring Revenue: It can be difficult to predict future recurring revenue.
• Churn Rate: Your customer churn rate will directly affect your revenue projections.
• Costs: Costs are significantly different from traditional business operational costs for SaaS companies. 
• Value to Acquisition Cost Ratio: It can be difficult to determine an accurate customer lifetime value to acquisition cost ratio in recurring revenue models.

The good news is that there are tools that bring simplicity to developing a SaaS financial model.

Why Is It Important for Your SaaS Business?

SaaS financial models are important for both SaaS startups and established SaaS companies for several reasons. Among the most important include:

• Financial Planning: These models give you a better understanding of your company’s financial stability and where you may find hurdles in your financial plan. As a result, SaaS financial models are effective tools in financial planning.
• Service Pricing: When you build your financial models, you’ll have a better understanding of how much money it costs you to acquire and provide services to customers. You’ll also learn about the lifetime value of a customer. This gives you crucial data as you determine and adjust pricing for your services.
• Fundraising: Your SaaS financial models show where your company is and where it’s likely headed. They provide crucial information investors need to determine a fair valuation for equity in your company while showing investors that your interests are aligned with theirs, an interest in proper financial management.
• Business Planning: SaaS financial modeling can also uncover inefficiencies in your business plan, giving you the opportunity to improve operational efficiency and profitability.

What are the Main Types of Financial Models?

There are five types of financial models that you should build for your SaaS business. Each different financial model provides unique insights into your business and may reveal opportunities to make improvements.

Find the details on the five different types of financial models and what each type tells you below.

Operating Expense

The operating expense financial model is designed to outline your SaaS company’s operating expenses. These models are unique to SaaS businesses because your operating expenses are likely significantly different from the types of operating expenses a more traditional company might have.

Of course, you’ll have administrative, sales, and other expenses, but you’ll also have operating expenses that are unique to SaaS businesses, like:

• Server Expenses: Server expenses may be considered one of many in the cost of goods sold (COGS) column. SaaS companies typically require high levels of bandwidth, and the cost of that bandwidth will grow as more users sign up.
• Subscription Management Expenses: You’ll likely need a subscription management solution that adds simplicity to billing, client relationship management, and other aspects of running your SaaS business.
• Development Expenses: All companies have expenses associated with developing products and services, but SaaS companies must continue to innovate or they’ll be left behind by their competition. So, these expenses are likely quite a bit higher than what a more traditional company spends on innovation.

This model is important because it gives you the opportunity to prepare for expenses ahead of time.

Forecasting

A financial forecast model uses current data about your company to make financial projections. For example, this type of modeling results in earnings and revenue forecasts, both of which are significant factors for investors in your fundraising rounds.

Moreover, you can create forecasting financial models to forecast growth or lack thereof in metrics like gross margins, net margins, expenses, and more.

There are few seasoned investors who are willing to make an investment in a company without seeing its financial statements. These are statements that report how well (or how poorly) your company is doing to its stakeholders. Reporting financial models typically include three key financial statements:

• Balance Sheet: Your balance sheet outlines your company’s assets, liabilities, and shareholders’ equity.
• Income Statement: Income statements, also known as profit and loss statements or P&Ls, are financial documents that show how much income your company generated and how much it retained over a predetermined period of time, typically one quarter or one year.
• Cash Flow Statement: A cash flow statement is a financial document that tracks the inflows and outflows of cash that your company experiences from operations, investing, and financing activities.

Headcount Planning

As the number of customers your business serves grows, economies of scale begin to take effect. With a higher headcount, you’ll need more server bandwidth, but that bandwidth may become less expensive on a per-user basis thanks to increased volume.

A headcount planning financial model gives you the opportunity to plan for these changes ahead of time by forecasting future headcounts based on current growth and how higher numbers of members will relate to changes in operational finances.

Recurring Revenue

A recurring revenue financial model gives you more details on three key aspects of any SaaS business:

• MRR: MRR, or monthly recurring revenue , is the amount of money your company generates on a residual basis every month from sales.
• ARR: ARR , or annual recurring revenue, is the amount of money your company generates on a residual basis every year from sales.
• ARPU: Annual revenue per user is the amount of money you make each year for each individual user on your platform.

Your recurring revenue financial model gives you the data to make more accurate revenue growth projections and create effective financial and business plans.

Key Metrics to Include in Your Startup SaaS Financial Model

One of the biggest difficulties business owners have when developing financial models for their Saas businesses is that it can be difficult to decide which metrics are important to include. SaaS metrics differ significantly from the metrics you’d expect to include in a retail business.

However, financial models built using the wrong metrics do nothing for you.

The good news is that, while the SaaS industry is a relatively new one, the most important metrics for these businesses are already pretty well-established. These include average revenue per user, churn rate, customer acquisition cost, lifetime value (LTV) to customer acquisition cost ratio, and payback period.

Below you will find the details of each of these important metrics to use in your financial models.

Average Revenue per User

It’s important for SaaS companies to know how much revenue they generate per user on average at different time increments. Those include:

• ARPU per Month
• ARPU per Year
• Average Revenue Over a Customer’s Lifetime

When you determine your average revenue per user metrics it’s important to remember that subscription fees aren’t your only source of revenue. Make sure to also include sources of revenue like:

• Revenue from Upgrades: If 10% of your customers upgrade their services after working with you for three months, revenue per user increases after three months.
• Revenue from Add-Ons: You likely have multiple add-ons. It’s important to include the revenue you generate from add-ons in your ARPU calculations to get a complete view of the money your company generates from sales.

Customer churn rates tell you and your investors what percentage of your customers cancel their services over specific time periods. 

Customer churn rates tell you a bit about what percentage of revenue you’re likely to retain as recurring revenue because of renewals. If your three-month customer churn rate is 11%, you can count on retaining 89% of your recurring revenue every three months, even if you don’t bring any new customers in.

Investors also pay close attention to customer churn rates because they help determine how quickly your business can grow, or if it can grow at all. Your customer acquisition and retention rates must outpace your churn rate for your company to be successful.

Customer Acquisition Cost

Your customer acquisition cost is the amount of money you pay to acquire new customers. For example, if you run an ad with a $10,000 budget over the course of three months, and that ad directly results in 1,000 new subscribers, your customer acquisition cost is $10, meaning you paid $10 in advertising costs per paying customer.

It’s a good idea to track your customer acquisition cost with each advertisement to get a gauge for the advertisements that do better than others. However, from a business and investment perspective, it’s also important to average your customer acquisition cost over all campaigns to get an accurate number of how much it costs for you to acquire a new customer in general.

LTV: CAC Ratio

The customer LTV to CAC ratio may seem foreign, but it compares two metrics we’ve already talked about: the lifetime value of a customer and your customer acquisition cost. In order for your SaaS business to be successful, your customer lifetime value must be reasonably higher than your customer acquisition cost.

It’s wise to shoot for a minimum benchmark in this metric of three to one. That means you earn three times your customer acquisition cost over the lifetime of your relationship with your customers. For example, if it costs you $10 to acquire a new customer, you should earn at least $30 over the lifetime of that customer.

Payback Period

The payback period, often referred to as the CAC payback period, is the amount of time it takes for you to recuperate your customer acquisition costs after you’ve acquired a new customer. The longer this period, the more difficult it may be for you to scale in the future. For example, Company A and Company B both have a three-to-one LTV to CAC ratio.

However, Company A’s payback period is four months while company B’s payback period is nine months. Company A will be able to grow far faster than Company B because it receives a return on its customer acquisition costs more quickly.  This allows Company A to reinvest in growth faster than Company B.

How to Build a SaaS Financial Model

The best way to build a SaaS financial model is to take advantage of spreadsheet software like Microsoft Excel or Google Sheets. However, you don’t have to be a spreadsheet whiz to build your SaaS financial models; we’ve put together a template to make the process as simple as possible.

You can use our SaaS financial model as a Google Sheets or Excel template. Just follow the steps below.

How to Use Our Template

We’ve made creating a SaaS financial model easier than it’s ever been before. Simply follow the steps below to use our template:

• Download the Template: Navigate to our SaaS financial model template webpage and click “Download Template.”
• Answer a Few Questions: Answer a few general questions about your business, including who you are, who the founder of the company is, and your SaaS company website.
• Click Download the Scorecard: When you click this button, the download will begin.
• Open the Template: Use Google Sheets or Microsoft Excel to open our SaaS Financial  Model template.
• Fill In Fields: Fill in all empty fields with accurate information from your business.
• Review Your Financial Models: Our template does all the math and builds the financial models for you. Once you fill in all fields, you’ll be able to view accurate financial models for your SaaS company.

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The SaaS Financial Model You’ll Actually Use

by Baremetrics. Last updated on June 26, 2024

Table of Contents

More founders journey articles.

Last Updated: October 6, 2023

Originally written by jaakko piipponen.

This post is aimed at CEOs and founders who are looking to upgrade their SaaS Financial Model to an operational tool that helps them make more informed decisions.

This is the same core model that enabled me to simultaneously work with dozens of startups using spreadsheets, while we built our SaaS financial modeling software: Forecast+ .

Key updates 

The update adds three major components to the model. As usual, the model is modular, which means you can add just the pieces you need. 

• Forecast vs Actuals
• Loans & Investments (for modeling PPP and other loans)

I’ve also included a clickable Table of Contents for easier navigation, and added a bunch of smaller improvements and fixes throughout the model. There’s also an Excel version of the template.

Why create scenarios

If you are a SaaS founder, there’s a non-zero chance you were losing sleep over everything going on in the world. As described in my more detailed post about building a worst-case scenario for your SaaS financial model, you should think of scenarios as multiple possible futures for your company.

Because we don’t know what will happen, we need to plan out what could happen.

The way I look at it,  building scenario-based forecasts lets you get ahead of the data instead of reacting to it .

We knew most SaaS companies were going to be affected by Covid-19  – the question was: “By how much?”

Why look at forecast vs actuals

When goals fly out the window like they did in early 2020, you need to set yourself new targets for the rest of the year.

Now, not everything about your business is under your control.

Comparing forecasts to actuals in your financial model lets you see in which of your planned scenarios you “land” in (or get closest to).

In other words, once a month closes, you will immediately know that “ Ah, I’m in my plan B, I need to take action X .” Say, slow down hiring.

Comparing your actuals against goals from 1, 3 or 12 months ago will help you understand your performance and areas where to improve.

Finally, the update adds a loan calculator. It includes draws, principal repayments, interest, and a possibility to forgive a part of the loan.

Many startups operate under the impression that they can’t or shouldn’t obtain a bank loan for their business.

While this is often true for unprofitable companies, we have seen many of our larger, profitable customers obtain bank loans to grow their business.

A loan can be an excellent way to amplify your returns without diluting your equity, but it also comes with increased risk. Thus, it’s important you plan out the loan’s impact on your business and your ability to pay it back.

You can also use the calculator for the PPP and EIDL loans available for companies in the U.S., as well as for estimating the impact of an equity investment. (Just clear out the payback terms)

An introduction to model structure

The structure of a strong SaaS financial model should be wholly modular. This means that you need to be able to add individual forecasts in a way that doesn’t require re-building the entire model every time.

Similarly, you’ll want the ability to easily drop in exports from your accounting tools or MRR metrics software to easily update your actuals.

The model consists of four types of templates:

• Operating Model
• Forecasting Models
• Reporting Models
• Data Exports (Actuals)

1. Operating model

At the core of your model is the Operating Model. This is the place that most Forecasting Models and Data Exports feed into.

In accounting terms, the  Operating Model is a monthly view of your Profit and Loss, Balance Sheet and Cash Flow Statements .

These three statements are a standard way to represent financials of  any business  from a mom-and-pop shop to a Fortune 500 company, and there’s no reason to reinvent the wheel for tech startups either. 

2. Forecasting models

As their name suggests, Forecasting Models are used to forecast out a specific area of your business, such as revenue or payroll. These models feed or push data into the Operating Model.

3. Reporting models

In contrast to feeding data into forecasts, Reporting Models pull data from other models to display the data in an easy-to-digest format.

After all, SaaS has many unique metrics and KPIs that can’t be communicated using only the three statement structure of the Operating Model.

You might also want to see summarized data in a quarterly or annual format, instead of getting information overload from the detailed monthly data.

4. Data exports

The purpose of Data Exports is to provide data for your other models from your accounting, billing or analytics software.

These tabs are never edited other than for making sure your data can be pulled into other tabs in a consistent manner.

In fact, maintaining the same export structure over time will offer significant time-savings and better accuracy as you update your model.

5. Bring in your team

A modular structure will also enable you to bring in your team leads to own pieces of the overall forecasts. After all, these are the people who you hired to be experts in their fields, and are therefore able to provide the best inputs and the right context in creating accurate forecasts.

The modular nature also allows you to provide only the information your leaders need to create their forecasts.

For example, your marketing leader may not need access to everyone’s salaries, and yet they should be the person owning your marketing funnel driving the new customer forecast.

The SaaS Startup Financial Model Template – Google Sheets and Excel Templates

Before getting started,  make a copy of the Google Sheets template  to follow along, or  download the Excel template .

Create a copy of the model from File > Make a copy

Note: The Excel template is obviously not connected to the separate Marketing Funnel Google Sheets workbook, and you’ll need to create one on your own.  \

Tired of spending hours forecasting in spreadsheets? Get a free trial of Forecast+ .

Operating model

The Operating Model contains Profit and Loss, Balance Sheet and Cash Flow statements, all displayed on top of each other in a monthly format. 

Structure of the Operating Model

Seeing actuals and forecasts side-by-side helps to ground your forecasts in reality. I’ve seen models where founders enter historical values with a mentality of “this is what I think happened” , instead of relying on their actual data from accounting (=what actually happened).

Almost as bad of an alternative is where someone manually types in every single line-item from their accounting. Needless to say this is very time-consuming and still error-prone.

Prepare data export tabs

A better way to get your accounting data into the Operating Model is to utilize Data Export tabs.

These exports are designed to pull in data in a consistent format, which means you only need to copy-paste the export from your accounting into the model to update it with the latest data.

In the following examples, let’s follow a company called Southeast Inc, which sells some obscure SaaS to airports around the world. They’re making about $700k in MRR, still make net losses, but work on becoming cash flow positive in the coming months. 

In the examples below, I’m using Quickbooks Online (QBO), but you can pull similar exports out of Xero as well. The structure in our example books follows SaaS best practices for expense categorization, but the template will work fine even if your books look different. 

In QBO, navigate to Reports on the left and select Profit and Loss. Select  All Dates  for the report period, and make sure to display columns by month. This structure ensures your historical export structure doesn’t change from month to month, and only new months are added as new data comes in.

Next, export the report. Open the export in Google Sheets or Excel, and copy and paste the contents into the Profit and Loss Export worksheet:

Profit and Loss Export from Quickbooks Online

Repeat the same process for Balance Sheet and Statement of Cash Flows (=Cash Flow Statement) in their respective tabs. 

Fill in operating model actuals by using data exports

You’ll want to pull the content of these three exports into the Operating Model. The goal is that after the initial setup, you’re able to just drop in new exports on a monthly basis with minimal effort. We’ll do that by using  Named Ranges.

Let’s start with the Profit and Loss, or PnL. 

In the example tab of  Profit and Loss Export , I’ve named the spreadsheet column A (the “range”) with the PnL account names as  PnL_Accounts . The month columns have named ranges following a syntax of  statementName_mmm_yyyy . Say,  PnL_Jan_2019 .

I have named the months from January 2018 to April 2020 to give you a fast start. 

You’ll only have to name the months that I haven’t named already. 

If you read this post in June 2020 and begin building your model, you’ll only need to add a named range for May 2020. If you have historical data beyond January 2018, you’ll need to add named ranges for each month you want to pull into the Operating Model.

Again, make sure your columns match mine exactly, i.e. April 2020 is in Column AC and not any other column.

The goal of this rather complex setup is to be able to use a consistent formula on the Operating Model that pulls in actuals from each export tab.

Repeat for Balance Sheet and Cash Flow Statement tabs. Please note the different prefix (BS and CFS), as they differ from the one used in the formula to pull in the Profit and Loss (PnL) actuals.

Copy and paste account names into operating model

After naming your exports ranges, we need to tell the Operating Model what exactly we want to pull in each month. 

Start by copying each account name from your PnL tab into the Operating Model, followed by BS and CFS. You can either clear out the Operating Model from the account names I use (pictured below), or rename the accounts to fit what’s in your books. Feel free to add more rows as needed. 

This takes a good 20-30 minutes, but don’t worry. You’re doing this just once—with the rare exception when your accountant adds more accounts to your books. (Once you have a solid Chart of Accounts, this really shouldn’t happen too often).

Use the formula to pull in the export data

Now, we finally get to pull in data. The formula I use appears a little hard to read, but what it does is actually quite simple. The first part of the formula looks up the current month from the export, and the second part ensures we’re pulling the exact account name from column A. 

Drag this formula to cover all the actual months you want to pull into the Operating Model. I recommend pulling at least the current year and the previous one:

Repeat the process for Balance Sheet, but remember to use the formula from the Balance Sheet section, as it changes the formula prefix from PnL to  BS.

Next, make sure the “Total” formulas include everything you just modified. 

The green sanity checks for the totals are extremely useful as I can immediately see if my Operating Model is missing an account that’s present in the PnL. 

Note that the formula structure breaks if you don’t have unique account names in your QuickBooks. For example, if you have two “Salaries” accounts. The way to get around it is to give unique names to each of your accounts, which is a good practice you should follow anyway.

Build the cash flow statement from balance sheet

Finally, one last time-consuming part is to finalize the Cash Flow Statement (CFS). The good news is that this pays off in spades once you begin to forecast your cash—say, from annual prepays, loans, or investments. 

The CFS doesn’t do anything on its own. It just looks at the differences in monthly values from your Balance Sheet and presents them in a separate statement.

An increase in Assets  decreases  the cash because you are buying something like a laptop. On the other hand, an increase in Liabilities — e.g. a loan —will also increase your cash. And vice versa.

Create first autopilot forecast

After the one-time initial setup, we can begin forecasting.

The first step is to create a forecast that’s just an average of your performance over the past three months. I call this “Autopilot,” since the forecast updates itself every month when new data comes in.

I like to use  Autopilot Input  column to automate the use of these averages. The column looks up the most recently closed month from the Dashboard – here, April 2020 – and looks back three months to calculate the desired average.

Before moving onto utilizing the more advanced Forecast Models like Revenue and Payroll, I usually make all forecasts in the Operating Model to reference the Autopilot Input column.

Profit and Loss

Start by making sure all your forecasts are pulling in values from the Autopilot Input column  (Column B).

Next, override any changes where the simple Autopilot doesn’t make sense. You can use the  Autopilot Input  column for any changes where the forecasted value remains the same.

Or you can edit the values manually directly in the cells. I recommend you highlight all the manual edits you make directly in the cells to make it easier to spot hard-coded changes later on as you update the model. I tend to use blue and yellow highlights (the latter being the higher priority edit):

Finally, you could increase the accuracy of the Autopilot by making your Cost of Revenue (COR / COGS) section to be calculated as a percentage of revenue.

Because costs such as hosting scale alongside your revenue, using the modified Autopilot will improve the accuracy of your forecasts.

Note that Autopilot is a slightly different beast from the  Last 4 Months (L4M) model, popularized by Jason Lemkin , in a sense that we don’t add any growth assumptions quite yet. While L4M can be really useful to look at as a separate scenario, Autopilot serves a different purpose: quickly building out the structure of your forward-looking financial model before diving deeper with custom forecasts. 

Balance sheet

For Balance Sheet Autopilot, I recommend using the last month’s value to avoid adding any unnecessary noise to your cash forecast before we actually understand what are the drivers in your business. I modified the Autopilot Input formula to pull only the most recent month. 

Cash flow statement

There is no Autopilot needed for the Cash Flow Statement since this is an automatic calculation. Make sure the formulas you create above extend to the forecasted months as well.  

Forecast models

After implementing these Autopilot setups, you should have much better visibility which line-items deserve a custom take on their forecasts. For most businesses, this means their hiring plan and revenue.

We’re going to build examples for both.  

1. Hiring plan

While you could continue to forecast your payroll spend as an average of the past few months, creating a Hiring Plan on an employee-by-employee level will increase the accuracy of your projections. This is where you’d benefit from bringing in someone from your leadership team to keep things up-to-date. 

On the Hiring Plan tab, add each of your current team members with their salaries, benefits, and other information. If you have recurring contractors that act as an extension to your team, add those as well with a contractor status.

For better readability, I recommend adding Headings for each team, e.g. “Engineering” and “Marketing”. 

Scroll down to the Teams section, and verify if the numbers make sense for the past few months. You don’t need to make the hiring plan accurate since the beginning of time, since the values from your accounting system will override data in the past. 

Finally, we will pull the output rows of the Hiring Plan into the Operating Model. Each total is a named range, and they’re already being pulled into the Operating Model. 

Note: There’s nothing preventing you from using Data Exports to pull employee data into the Hiring Plan, but in my experience, the time savings aren’t significant until you have 50+ employees and are constantly hiring.

Now all you need to do is go into the Operating Model and copy and paste the green hiring plan formulas under their respective payroll accounts. These formulas pull the salaries, benefits and payroll tax information from the Hiring Plan. 

Pay careful attention to the formula name! If the named range says it’s pulling  Hiring_Plan_Marketing _Salaries , it’ll only pull marketing salaries. Thus, you can’t use the same formula elsewhere and expect it to pull Sales Salaries. 

That’s it for the Hiring Plan! With adding only one custom forecast to your financial model, you’ve markedly improved the accuracy of your expense forecast. 

2. Revenue model

Revenue is generally the most important and the most difficult item to forecast in any business. To forecast effectively, we will first want to see what the history looks like. 

3. Prepare data export tabs

To get started, we need data about your customers. The easiest way to see this is to pull a handful of reports from a  SaaS metrics platform such as Baremetrics . You can also enter these manually, or use an export from your billing system.

Head over to  Monthly Recurring Revenue  in your Baremetrics dashboard. 

First, select “All time” as the time period from the dropdown on the top right. The chart should automatically switch to display data by month. 

Export both  Graph  and  Breakout  from the top right, and repeat for the following reports:

• Active Customers  (both  Graph  and  Breakout )
• Upgrades  (just  Graph )
• Downgrades  (just  Graph )

Copy and paste each of these into the MRR Export tab in the financial model. You can ignore copy-pasting the dates from all exports except the first one on left (MRR Breakout).

Six exports from Baremetrics, color-coded to denote where to paste each export

4. Fill in actuals

Next, you’ll need to tell the Revenue Model to retrieve it from the exports. I’ve named the columns in the data export template, so if you have exported the values from your subscription metrics tool, you can now navigate to the Revenue Model tab to copy the formulas across the time period you want to pull in.

Revenue Model formulas in green pull in the actuals for that row from the MRR Metrics data export tab (here: Baremetrics Export).

5. Create autopilots

Using an Autopilot forecast is a great way to get started. The example template pulls the number of new customers from a Marketing Funnel, but for now, replace it with something like a median for the past three months. ARPC (Average Revenue Per Customer) should be already set to an Autopilot using Weighted Average.

The company has been getting 14-28 new customers a month at an average size of $1,239/mo each. The Autopilot continues to project out 20 customers each month, bringing in $24,773 in  New MRR . While this obviously needs to change to something more accurate, you’ll immediately get an idea what is the baseline to beat. 

Next, use Autopilot to project out your expansion, contraction and  churn . As you sum these with the new customer MRR, you end up with  Net New MRR  for the month. 

Add the Net New MRR to your previous month’s Monthly Recurring Revenue, and you have your revenue forecast for the month.  

Finally, we need to take the revenue forecast and make sure it’s reflected in the Operating Model. Similar to the Hiring Plan, the yellow MRR row is the output we want to pull in. The row is named  Revenue_Model_MRR .

Navigate to the Operating Model tab, and make sure the formula is pulling values from the Revenue Forecast Model.  

6. Create a marketing funnel

The biggest remaining flaw in your Autopilot forecast is that your new customers are coming in at a flat rate, when you’d likely want to see growth.

In this example, we’re improving this forecast by bringing in our imaginary Chief Marketing Office (CMO). They own the process of tracking the conversions from visitors to leads to paid customers, and have the best insights as to what the future might look like from a marketing perspective.  

Since we are talking about the future, this would normally mean adding another Forecast Model.

This time, the  marketing funnel lives in another workbook updated by your marketing leader , which means we will need just another data export to pull in the outputs in.

Here’s the example  SaaS marketing funnel template . Again, create a copy of the template to follow along.

The funnel we are building is simple. Visitors to the site come from two sources:

• Paid advertising
• Organic search.

Paid ads are driven by the spend in a given marketing channel, whereas organic traffic is expected to grow as a result of content marketing efforts. 

Start by pulling in the Google Ads spend into the AdWords tab of the Marketing Funnel.

Copy and Paste the SaaS Financial Model URL into this section, and define from which row you want to pull data from. Given you have created copies of both templates,  you’ll have to update this URL and make sure the Google Ads Range matches yours .

Next, modify the template to fit your needs. Enter how many visitors convert to leads, to marketing qualified leads and ultimately, to new customers.

The numbers with a white background are a formula, and the advertising spend in green is pulled from your Operating Model. You can edit any future values with a blue background. I have included some weighted average calculations to give you a faster start.

For modeling purposes, it’s the new customers we are ultimately interested in, but having the steps in between enables us to move away from an educated guess to a more systematic projection. 

On the tab of  Marketing Funnel – Summary , we can see how new customers are summed up from paid and organic sources, only to be pulled into the tab with the same name in the master financial model.

Although you could copy and paste this section into the master model and pretend it’s an export, I recommend using the IMPORTRANGE formula to bring over the summary automatically.

You should now have an idea of how to add in additional forecast models to your financial model, and have your respective team leads own them. 

Note 1: If you don’t need the marketing funnel living in a separate workbook, you can just copy-paste both the Organic and Adwords tabs into the financial model. All you need to do is to change the Marketing Funnel – Summary to reference these newly created tabs. 

Note 2: This example is for marketing-driven companies. If you are sales-driven one, you may want to add an entirely new revenue forecast model to pull data from your existing sales pipeline 

7. Forecasting cash from annual plans

Most of our SaaS clients have mix of customers paying either monthly or annually.

One of the biggest reasons prospective clients reach out to us is to better understand the cash impact of their annual plans. This makes sense, because the cash coming in from annual prepayments is particularly challenging to forecast, and yet prepayments can be critical in funding their growth.

In this post, we are going to look what would happen if Southeast Inc were to introduce an annual billing option. In other words, we ignore existing customers for now.

First, we want the Revenue Model to split new customers into monthly and annual customers.

So far, Southeast’s customers have been paying on a monthly basis. Therefore, the Net Income and Net Cash Increase / Decrease are nearly identical. (In practice, you’d have some small differences due to pending payroll taxes or credit card balances to be paid off.)

Before introducing annual plans, the company’s Net Income andNet Cash Increase / Decrease are nearly identical.  

As you can see from the chart below, having 30% of your new customers pay annually would significantly increase your cash coming in. Now you can actually see the black line in the chart.

After introducing annual plans, the company’sNet Cash Increase goes up significantly. 

Note: I am going to leave the estimated percentage of new customers paying annually at 0% in the published template. Given the impact to your cash balance is so significant, I want you to consider the % very carefully before introducing it as a part of your forecast.

Don’t create a homegrown cash forecast

Many companies I’ve seen attempt some sort of of internal, custom calculation for figuring out the cash impact on their business. This is like re-inventing the wheel – and the resulting wheel is probably not even round.

The standard and widely-understood method for forecasting cash from annual payments is to forecast Deferred Revenue .

The challenge is that I have never met a CEO or a founder who “gets” the deferred revenue upon first walk-through. This isn’t to say startup finance folks are some kind of geniuses, far from it, but rather to highlight that there are many moving pieces you need to keep tabs on.

First, forget debits and credits, and let’s remind ourselves what we know already:

• We know our what our revenue forecast is since we just built it

Revenue and Cash coming in begin to differ from May onward after introducing annual plans

To get to cash, we should think of it as making adjustments to the revenue each month .

Cash impact of new customers – Adjustment example

Let’s use a super simple example where a customer signs up for a $12,000 prepaid, annual plan on January 1st. There are no other customers, renewals, or any other activity at the company. Not even expenses.

Now, that $12,000 is not actually revenue – it’s just a prepayment. You can figure out your monthly revenue by dividing the prepayment by the number of months in the contract. Just like MRR.

To put it differently, recognize the payment over the service period, which conveniently for us, is a calendar year. (Ignore daily recognition for now).

As a reminder, we want to figure out what is the adjustment to revenue we need to make that gives us the cash impact on the business.

Given this is an example with only one customer, we already know the outcome—the $12,000 cash coming in. But repeated across hundreds or thousands of customers, we have no idea what the outcome would be unless we have iron-tight understanding of what the adjustment process should look like. 

To create the adjustments, we need to figure out what’s our Deferred Revenue balance on the Balance Sheet. Every new customer prepayment adds to the deferred revenue balance, whereas the balance gets reduced as revenue is earned or “recognized” over time.

Here’s what the additions and deductions would look like for the same customer signing up in January:

Still, while we now begin to understand how this works in theory, the balance sheet will only accept this in one format only: a balance.

So we’ll sum up all of these additions and subtractions to get to the month-end balance of Deferred Revenue: 

The thing is, the  monthly difference in the Deferred Revenue balance  is  the adjustment we are looking for . Given that this company had no previous deferred revenue, the first month’s difference is $11,000 minus the previous month’s balance (zero) which equals $11,000.

For the following month, the equation is $10,000 minus $11,000, which equals a negative ($1,000).

If we now sum Revenue ($1,000) and Deferred Revenue Adjustment ($11,000), we will finally understand what is the cash impact. $12,000 the first month, and no cash coming in thereafter.

The problem is that the cash impact isn’t directly visible anywhere in your books, and that’s where most confusion with CEOs/Founders seems to arise. 

The main difference is that your accounting will first deduct Costs and Expenses from your Revenue, resulting in Net Income. Only after you get to Net Income, it is then adjusted with Deferred Revenue.

And to make things more difficult, it is  also  adjusted with everything else from Accounts Receivable to paying off credit cards. The end result is Net Cash Increase, which is the amount that gets added to (or deducted from) your bank every month. 

Given the super simple example company has no other activity or expenses whatsoever, the outcome would still be the same:

Adjustment – Southeast Inc

The good news is that as long as you actively project our future revenue in the Revenue Forecast Model, the financial model template will automatically calculate the Deferred Revenue adjustment for you.

Your labor with the Cash Flow Statement will also come to fruition, since it will automatically calculate the adjustments for us from the balance sheet Deferred Revenue balance differences. 

When you think about it, your Operating Model is actually a huge adjustment table. You have Revenue at the top, followed by all sorts of expenses and balance sheet changes, resulting in the Net Cash Increase/Decrease at the very bottom. 

Keep in mind this is still a simplified example, as Southeast Inc. is only beginning to sell annual plans – they don’t have any renewals or existing annual customers to worry about. Ping me on  Twitter or add a comment in the model and I’ll attempt to clarify.

Loans & Investments

Many of our larger bootstrapped customers have taken out loans in the past to invest in their growth, or to maintain a larger cash cushion just in case. A loan is typically hard to obtain for an early stage startup, but once you begin to generate profit, they can be a cheap source of leverage for your business. Before moving forward, I’d recommend getting proper consultation  first.

Given the many government relief packages in the United States and elsewhere, I have included two types of loan forecast models.

PPP Loan or Partially Forgivable Loan

The first one is a partially forgivable loan where a part of the loan doesn’t have to be paid back. The example here follows the  Paycheck Protection Program Loan  offered here in the U.S., but you should be able to substitute the values with what your government or bank offers.

You can begin filling in the Loan Terms highlighted in blue, and the loan forecast will fill in automatically. I’m using the BASE format in forecasting the balance sheet balance, which stands for:

• (B) Beginning Balance – last month’s ending value
• (A) Add balance to be added, such as the loan draw
• (S) Subtract the amount(s) taken out of the loan balance, such as the principal repayment
• (E) Ending Balance. This is a sum of B + A + E, and feeds into the Balance Sheet on the Operating Model

Regular loan (or an investment)

If a forgivable loan isn’t an option for you, you might want to look into a regular loan. This could be a loan from the Small Business Administration, or from a bank.

You can also use this forecast model as for investments such as convertible notes – just clear out the rows with principal and interest payments.

While the calculator will technically work for SAFEs and priced rounds as well, you might want to make the output to flow into the Equity section of the Balance Sheet.

Scenarios 

Building scenarios is a way to look into multiple possible futures for your company. Most of our customers tend to look at 2-3 scenarios:

• Target , or Optimistic scenario. This is where everyone in your team is trying to get to.
• Base-Case . Slightly conservative forecast that your leadership should believe you can handily beat. Sometimes Base-Case mirrors the average performance of your past three months, which means it can be fairly accurate for the next few months, after which it’s likely to understate your growth. You can also combined Base-Case and Target, where the next few months project your average performance, after which the growth picks up.
• Fallback or Worst-Case. This scenario is for the most paranoid of us, as it helps you figure out what to do if everything goes wrong. If there’s even the slightest possibility that the coronavirus wipes out 30% of your revenue, this is the scenario you use to plan for it.

Given how cumbersome it is to manage multiple scenarios in a spreadsheet, I have gone with two active scenarios, while preserving your previous 2020 Target for comparison purposes.

Preserve a copy of your old forecast

Expect that your old target for 2020 is no longer relevant. However, it is going to be useful to compare against as we start building a more realistic outlook.

Create tab named  Operating Model – 2020 Target,  and copy and paste  values and formatting  from your current, not-yet-edited Operating Model.

We are going to use this hard-coded snapshot of your old forecast in our next section about  Budget to Actuals .

Create worst-case scenario

Start by creating carbon copies of your Operating Model, Hiring Plan and Revenue Model. Instead of duplicating each tab, select the tab contents and copy over the formulas, and then the formatting by using paste special. I recommend you add “Worst-Case” at the end of each tab name so you quickly know what you are looking at.

Similarly to the previous step with 2020 Target, go ahead and add named ranges for each of the tabs:

• Oper_Model_Revenue -> Oper_Model_Revenue_Worst_Case
• Revenue_Model_MRR -> Revenue_Model_MRR_Worst_Case

What’s different from the previous step is that you’ll need to also connect these newly created modules to the Operating Model, Worst-Case tab.

The good news is that all you need to do is to add  _Worst_Case  at the each of each account where the forecast is pulled from either the Revenue Model or Hiring Plan.

Now is the time to start editing this scenario. The way I see it, the purpose of the Worst-Case scenario is to figure out what to do if everything goes wrong.

You’re already familiar with editing the each of the forecast models and the Operating Model – all you need to do is to figure out the inputs in your Worst-Case scenario and enter those in.

I’ve included some example edits in the Operating Model, Worst-Case (highlighted in yellow). Although your main changes should happen on the Revenue Model and Hiring Plan tabs, there are some changes you probably should make directly on the Operating Model.

If you want more detail as to what should go into building a worst-case scenario, check out my post How to to Build a Worst-Case Scenario Using a SaaS Financial Model.

Repurpose your ongoing forecast as the Base-Case

To avoid confusion between scenarios, I recommend you append “Base-Case” at the end of your existing Operating Model, Hiring Plan and Revenue Model tab names.

If you are building more than two scenarios, you could rename the named ranges to include  _Base_Case  at the end. For two scenarios I don’t think it’s worth the effort.

Budget to actuals (forecast vs actuals) 

How to compare forecasts to actuals.

Comparing your actual performance against your previous projections is a great way to iterate and improve your forecasts.

Note that I’m talking about forecasts in plural – this is not a one-off exercise where you compare your actuals against a stale budget from a year ago.

Instead, you should compare your performance against every single monthly forecast you have created over the past months.

Example of comparing your actual April performance vs the 2020 Target.

When you create your first few snapshots of your previous monthly forecasts, you’ll catch errors such as expenses you forgot to forecast in the first place. Later on, the performance comparison will help you focus your attention on the areas of your business that matter most.

If your accounting fees were off by 1% or even 5%, it doesn’t matter all that much. Now, say that your recurring revenue is right on target but your new trials are lagging 10% behind vs your projections from a month earlier. This is not only a leading indicator of missing next month’s revenue goal, but also can point you out to the right direction where your team might need additional support.

Access snapshots of previous forecasts

In order to access our hard-coded, former forecasts, we need to add  Named Ranges  to the 2020 Target – Operating Model tab. I recommend you use a syntax where you add the tab name at the end of your previously used named range. This makes it trivial to pull in the desired values on the reporting tab.

Add the following ranges (or more if you want to pull other items to the Dashboard / Reports tabs):

• Oper_Model_Revenue_2020_Target
• Oper_Model_Support_2020_Target
• Oper_Model_Service_Delivery
• Oper_Model_Engineering
• Oper_Model_General
• Oper_Model_Sales_and_Marketing
• Oper_Model_Bank_Accounts

Next, we are going to access these former forecasts in the Reporting Models section.

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Reporting models

As the name suggests, Reporting Models pull data from elsewhere in your model and present it in a more digestible format. The goal is to create summary tabs that give you a high-level overview of what’s happening with the business, enabling you to do deeper dives on areas that require attention.

Here’s what we will build:

• Dashboard.  This is the place you you  need  to review each month. Include only the most important metrics and numbers for your business to avoid information overload.
• Reports.  A deeper dive, but still in a summarized format. I recommend you use this area to get visibility to your budget to actual comparison, and for comparing your scenarios to each other. It’s also useful for looking at your longer term forecast.
• Metrics.  Very similar to the Reports tab, but with a focus specifically on SaaS metrics. You want to see many of these metrics like CAC and LTV in the right context and see how they compare to each other, for which I have found it useful to create a separate tab for them.

You could even create a reporting tab specific to your team or investors, and share that on a separate workbook using the IMPORTRANGE functionality we discussed earlier.

Financial model dashboard is a great place to review the most important areas of your business on a monthly basis.

The goal is to include several high-level tables and charts, which enable you to highlight the areas where you need to do deeper dives into the drivers of your business. It will also help you spot any potential problems. 

Here’s an example of a dashboard view:

Start with financials summary

Personally, I prefer starting my monthly review by looking at a financial summary table such as this. It’s up to you if you want to look at last month’s performance vs actuals, or whether you want to have a few months’ summary like we had in the previous version of the model. Larger companies often use a quarterly view instead of monthly.

Profit and Loss doesn’t tell you the impact on your bank account, for which it’s useful to include a summary of the Cash Flow Statement and the Bank Balance. 

The actual retrieving of the data is easy: The Actuals column will pull data from your current Operating Model – Base-Case tab, whereas the 2020 Target uses the Operating Model – 2020 Target. Like this:

Select other charts & tables

Next, decide which charts you want to look at. I highly recommend you include at least the revenue forecast and bank balance projections:

Current Revenue forecasts for Base-Case and Worst-Case scenarios.  Also plotted: previous 2020 Target.

Current Bank Balance forecasts for Base-Case and Worst-Case scenarios.  Also plotted: previous 2020 Target.

The rest is up to you. I have included charts for Cost & Expense breakdown and Cash Flows, but you could also bring in relevant tables from the Reports or Metrics tabs introduced in the next chapter.

Utilize chartbuilding tab for easy updates & custom charts

While you could pull the dashboard charts directly from the other tabs, I recommend creating another reporting model called  Chartbuilding .

This makes it easy to quickly create and update charts, without having to worry about something breaking in the model. Conversely, you can also freely add rows and columns in the forecasting models without having to worry about the dashboard breaking.

Utilizing Chartbuilding tab will also let you create custom charts such as the Revenue chart with solid line for actuals and dotted line for forecasts.

Create named ranges for the data you want to look at, and pull them into the Chartbuilding tab. This could be metrics, revenue or accounts from the Operating Model—anything at all that lives inside your financial model. 

For example, name your total bank accounts like this:

• Base-Case:  Oper_Model_Bank_Accounts
• Worst-Case:  Oper_Model_Bank_Accounts_Worst_Case
• 2020_Target:  Oper_Model_Bank_Accounts_2020_Target

Next, pull these figures to the Chartbuilding tab. All you need to do now to create a good-looking chart is to select the area, and format each series. (Say, for dotted-line forecasts.)

Reports 

You’ll want to organize this area so that the most important tables stay on top, and you’ll scroll down to make deeper dives into the data. Keep in mind you can and should change this order, once your needs change.

Case in point: We just introduced new scenarios, and it’s important we understand what is changing vs your former 2020 goal.

Before comparing the scenarios to each other, I want to first familiarize myself with the 2020 former target as it relates to 2019.

It looks like:

• Revenues increase by 40%
• Gross Profit increases by 40%
• Expenses grow only 20%, mostly driven by Sales & Marketing
• The company makes a $229k loss
• Bank balance grows by $566k due to introducing prepaid annual plans

Now, to better understand and improve your new Base-Case and Worst-Case scenarios, you can look at the same high-level metrics.

• Revenues increase is only between 15% (Worst) and 25% (Base)
• Gross Profit increases by 17-26%
• Expenses change from -3% decrease to 6% increase
• The company profitability varies from a small $73k loss to $38k Net Profit
• Bank balance change equals Net Income

Even the initial high-level review reveals that there’s still work to do with the scenarios.

Is it likely that the Worst-Case scenario still achieves 15% annual revenue growth while cutting costs – particularly engineering?

And how is it that hosting costs increase by almost 30% if the revenue growth is only half that? Finally, what happened to the annual plans?

Do both scenarios assume selling annual plans is no longer an option – especially since now those would be more helpful than ever?

I’ve included several other examples to give you better visibility what’s happening in your business. Take a look at the quarterly view and how your revenues, expenses and bank balance change over time.

The percentage of revenue tables are another way for you to normalize the numbers and compare the scenarios between each other.

Use Reports to sanity check long-term forecasting

In building this template I have focused on the next 12 months only, but here are couple of pointers how you can start building and sanity checking your longer term forecasts.

Below, you can see that although you plan to become near-profitable in 2020, your capital requirements for 2021 would be about $2 million! Either you need to decide if your investment to Sales & Marketing is too high, or figure out how you fund this growth.

I’d also review if investments in the other areas of your business are sufficient to sustain your targeted growth. Your R&D spend might be within possibility, but your General & Admin spend is definitely too low by 2021.

Follow this process as you iterate on your long-term forecasts, and come back to check on the Reports and Metrics tabs how your changes affect your business.

Check in on SaaS Metrics

I like to think of metrics as sanity checks on the sustainability of the business.

Is my Customer Lifetime Value (LTV) high enough compared to my Customer Acquisition Cost (CAC) to continue investing in Sales & Marketing?

If not, what needs to change? Or if I’m making 80% gross margins right now, but the forecast says it’s decreasing to 70% in six months, do I understand why? 

Forget benchmarks against “average startups” 

In contrast, I’m not a huge fan of using metrics to benchmark your company against the average startup.

I often get asked questions along the lines of “What’s a good CAC payback time?” and my go-to response is the ever-boring “it depends.” For this specific question, it depends on the company’s capital position and appetite for risk.

A VC-funded, well-capitalized startup selling large, prepaid contracts might be comfortable with 12-18 month payback times. On the other hand, a bootstrapped, profitable company selling monthly plans can’t wait that long without a massive cash cushion.

In this example template, we’re pulling data from the Revenue Forecast Model and the Operating Model to calculate some of the most common SaaS metrics. 

Customer Acquisition Cost

Let’s begin with  Customer Acquisition Cost , or CAC.

First, pull your total Sales & Marketing expenses from your Operating Model, and the number of new customers per month from your Revenue Forecast Model. The named ranges for each are:

• Revenue_Model_New_Count_1m  +  Revenue_Model_New_Count_12m  (if you have annual plans)

Now, this is just the company-wide or “Blended” CAC. While useful, given that paid acquisition is a large part of the Southeast Inc’s marketing strategy, we’ll also want to calculate another metric: a Paid CAC (or CAC per Marketing Channel). 

We know the breakdown of new customers from paid and organic sources. Thus, we can pull your Advertising (=AdWords Spend) account from the Operating Model, and pull new customers originating from Google Ads from your Marketing Funnel. 

Customer Lifetime Value

Next, let’s  calculate the customer Lifetime Value (LTV) . This is calculated by multiplying gross-margin adjusted Average Revenue Per Customer (ARPC or ARPU) by the expected customer lifetime.

A common mistake is to use just the revenue-based figures and ignore the gross margin.  I don’t recommend such an approach, as the result is something between overstating the strength of your metrics and lying to yourself. 

To make the adjustment, we’ll first need to calculate the gross margin. Pull your Revenue and Cost of Revenue from the Operating Model, and divide the second value by the first. That’s your gross margin for each month. For SaaS businesses, this is usually between 70-90%. 

Next, pull the number of customers from the Revenue Forecast Model. Divide Revenue by the number of Customers to get to ARPC. Now, multiply ARPC by the Gross Margin, and you have your gross-margin adjusted figure!

Finally, pull in your customer churn (logo churn). Calculate the customer churn % by dividing the current month’s customer churn by the previous month’s total customers. The expected lifetime is often estimated as 1/churn, which is what we’re going to use here. 

Now we have all the elements we need to calculate the LTV. You can even add the CAC to LTV ratio at the bottom.

While you could leave it here, I would also recommend creating quarterly views for all of these metrics. Your business goes through ups and downs each month, and monthly metrics aren’t always the best representation of the overall state of your business. Or at least the monthly view shouldn’t be the only one.

For example, CAC Payback appear to vary between 6 and 15 months in 2019. Quarterly view smooths out these variations, and yet provides enough detail for you to find trends in the data. 

The biggest gotcha in repurposing the SaaS Financial Model 3.0 to your needs are the named ranges. While named ranges bring much-needed clarity into your formulas describing in plain English where your data is coming from, this requires setting them up correctly.

If you follow the instructions in setting up your Operating Model, most of your “totals” such as  Oper_Model_Revenue  will keep your named ranges intact and usable elsewhere in the model. O

On the other hand, the ranges that are located arbitrarily in your books will cause problems if not re-oriented to their correct location. Notably,  Oper_Model_Advertising  will need to be told its’ new location once you have updated the Operating Model with your data.

That said, whether or not you use named ranges, any multi-tab financial model will require you to verify the accuracy of the data you’re pulling in. The way I look at it is that it’s much easier to reference a row named  Hiring_Plan_Engineering_Salaries vs trying to decipher what is it I’m pulling in from the Hiring Plan row 69.

The goal of updating your SaaS financial model on a monthly basis is to give you the tools you need to make operational decisions about your company.

You should be able to able to answer questions like:

• How are we performing against our Target scenario?
• What are our capital requirements until we become cash flow positive?
• How is my paid advertising driving my top-line growth?
• We missed our revenue target last month. Why is that, and what we need to change to get back on track?

Building a comprehensive, operationally-focused financial model requires a lot of work to set up, but the benefits are critical to grow your business, and are absolutely worth the effort.

That’s why Baremetrics Forecast+ is an essential tool for growing SaaS companies. 

To start modeling your finances and effectively operate your business, import your bookkeeping and accounting into Baremetrics Forecast+ . Get accounting and business metrics all in one place. 

Some of the major sectors that commonly utilize this SaaS financial model are:

a. Software and Technology b. E-commerce and Retail c. Finance and Banking d. Healthcare e. Marketing and Advertising f. Human Resources.

However, it is crucial to recognize that this model can be applied to various other industries due to the flexibility and scalability offered across different sectors.

• What is a SaaS financial model and why is it important for a SaaS business? A SaaS financial model is a tool that forecasts a SaaS company's future financial performance. It's vital for making informed decisions, attracting investors, and ensuring long-term growth.
• What are the key metrics to consider in a SaaS financial model? Key metrics include ARPU, Churn Rate, CAC, LTV:CAC Ratio, and Payback Period.
• What are the best practices for creating a SaaS financial model? Best practices include ensuring data accuracy, regular updates, conducting sensitivity analysis, and involving stakeholders in the process.
• How does a SaaS financial model help in forecasting revenue and making informed business decisions? A SaaS financial model helps in forecasting revenue and making informed business decisions by providing a structured framework for projecting financial performance. It allows businesses to: Forecast Revenue, Assess Profitability, Plan Resource Allocation, Conduct Scenario Analysis, Support Fundraising Efforts, and Measure Performance.Overall, a SaaS financial model acts as a roadmap for the business, providing a quantitative foundation for decision-making and facilitating the evaluation of different strategic options.

To create a reliable and accurate SaaS financial model, follow these steps:

a. Gather Data

b. Define Revenue Streams

c. Build Expense Categories

d. Develop Assumptions

e. Construct Financial Statements

f. Validate and Adjust

g. Perform Sensitivity Analysis

h. Update and Monitor

The key components of a SaaS financial model include:

Revenue Model, Cost Structure, Customer Acquisition and Retention, Churn Rate, Cash Flow Analysis, Growth Projections,Key Assumptions These components contribute to business success by providing insights for long-term growth. They help identify areas of improvement, inform strategic decision-making, and provide a roadmap for achieving financial goals.

• How does the SaaS financial model differ from traditional business models? Unlike traditional business models that often focus on one-time sales and physical goods, SaaS models revolve around recurring revenue from subscription-based services. This difference impacts cash flow, customer retention strategies, and long-term financial planning.
• How do you calculate the break-even point for a SaaS company? The break-even point for a SaaS company is when its monthly recurring revenue (MRR) equals its monthly operating expenses. It can be calculated by dividing the total fixed costs by the contribution margin per unit (price per subscription minus variable costs per subscription).
• What role does the Customer Lifetime Value (CLTV) play in SaaS financial modeling? CLTV represents the total revenue a company expects from a single customer account. It plays a pivotal role in determining how much a company should spend on customer acquisition and retention.
• How do you factor in growth rates and scalability in a SaaS financial model? Growth rates can be projected based on historical data, market trends, and marketing efforts. Scalability factors in by considering how costs will change as the company grows, ensuring the model remains viable as the user base expands.
• What is the significance of the Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) in SaaS? MRR and ARR are critical metrics in SaaS, representing the predictable revenue stream from subscriptions. They provide insights into the company's health, growth trajectory, and the effectiveness of sales and marketing strategies.

Baremetrics

Baremetrics is an analytics and insights company that provides SaaS and subscription businesses with the tools they need to monitor growth, churn, revenue, and more. Founded by Josh Pigford in 2013, the platform stands out for its ability to offer real-time financial metrics directly integrated with payment platforms like Stripe, Braintree, and others. With its user-friendly dashboard, Baremetrics facilitates data-driven decisions, helping businesses to understand their financial health at a glance. The company is also known for its commitment to transparency, even going so far as to publicly share its own metrics in the early days. This approach not only set a new standard for openness in business but also underscored the platform's value in leveraging data for growth. Baremetrics continues to evolve, offering features such as forecasting, recoveries for failed charges, and custom reports, making it an indispensable tool for subscription-based businesses aiming to scale efficiently.

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Startup financial models - 12 templates compared

Posted by Stéphane Nasser | April 20, 2020

As a founder, there comes a time when you need a business plan, complete with financial forecasts, income statements, and fancy graphs that will impress your investors.

Don't build it from scratch - use an existing model.

A financial model allows you to draft financial projections easily, fast, and in a professional manner. A great template will also force you to think through all the aspects of your project and make sure you really get the financial logic behind your business.

It can be annoying but trust me, it's worth your time.

This post compares the top 12 templates of financial models for SaaS startups. I have personally tested each model. I have ranked them on 40+ items along 5 categories. I've looked at both spreadsheets and SaaS apps, and both free and paid solutions.

If you are looking at building your SaaS financials, this article is for you.

Table of Contents

Methodology - what makes a great financial model for saas startups.

Here is the methodology I used to build this benchmark.

I compared 40 points across 5 categories: (a) financial statements, (b) analysis capabilities, (c) revenue modeling, (d) cost modeling, (e) extra features. A detailed analysis of each model is available below. In each case, I tested the software/spreadsheet myself.

Criteria 1: Financial statements

• Time scale : Are the statements over 1 year, 3 years or more? You usually want 3 years as a minimum when you speak with professional investors.
• Income statement : Does the template include an income statement? You usually want a monthly income statement, at least for year 1.
• Cash flow statement : Same as income statement
• Balance sheet : Same as income statement
• GAAP/IFRS : Are the statements compliant with GAAP and/or IFRS rules?
• Currency : How many currencies are available?

Criteria 2: Analysis capabilities

• Financial analysis : Number of typical financial metrics included e.g. breakeven point, quick ratio, average inventory, etc.
• SaaS analysis : Number of typical SaaS metrics included e.g. MRR growth, SaaS magic number, CAC/LTV, etc.
• Graphs : Number of built-in graphs
• Costs by P&L category : Does the template break down costs into P&L categories (CoGS, RD, G&A, etc.)
• Costs by departments : Does the model break down costs into departments (sales, marketing, CS, engineering, etc)
• VS Scenarios : Does the template allow you to compare multiple scenarios?
• VS Industry comparables : Does the template compare your financials against industry comparables?
• VS Actuals : Does the template allow you to run your model versus your actual numbers?

Criteria 3: Revenue modeling

• New client acquisition : How do you enter new clients into the model? Possibilities include: entering a number manually for each month or year (it sucks); autofill the model from a base number and a growth rate (sucks a bit less); autofill several streams - each stream represents a different type of client e.g SMB/enterprise (better); or even fully model each acquisition channel (the best, very rare)
• Offerings : How many offers can you define and how precisely can you model them? This includes the possibility to create one-off offers, recurring offers, or a combo, but also the possibility to create introduction times and end times for specific offers.
• Pricing model : How many pricing models can you define and how precisely: tiers (free, basic, premium), revenue models (per seat, per usage, etc), automatically increase or decrease the plans price over years.
• Existing clients : Can you model expansion, contraction, churn, reactivation?
• Commitment : Can you model monthly VS yearly VS multi-annual contracts?
• Service revenue : Can you model punctual service revenue on top of all the other pricing models and offerings?
• Enterprise specific : Does the template offer specific features to model complex enterprise sales, such as landing/expansion, custom product developments, various sales cycles, etc?

Criteria 4: Costs modeling

• Direct labor costs : The best templates allow you to correlate direct labor costs with relevant metrics. For example, your sales staff is calculated based on forecasted income and sales target per account executive. Same for customer success payroll with number of customers and workload target per CS staff.
• Direct non-labor costs : just like with labor costs, the best templates allow you to link some direct non-labor costs with relevant metrics. For instance, server costs can be a % of MRR.
• Indirect labor costs : same as above. Even for indirect costs, some templates find smart ways to tie them to some aspect of the business.
• Indirect non-labor costs : same as above
• Payment terms : Can you define the payments terms with your vendors and suppliers? May be useful if there is a hardware component to your offer.
• Hardware-friendly : This is a special mention for templates that model things like shipping costs, inventory delay, etc.

Criteria 5: Extra features

• Documentation : Is there proper documentation in the model and on the website? Are there good explainer videos? What kind of direct support (chat, email) comes with the template?
• Languages : In what language is the template available?
• Third-party integration : Third-party integrations can be useful to input or update data over time, or to display advanced graphs.
• Excel spreadsheet : Can you access your financials as a Microsoft Excel spreadsheet? This is a must if you need to share it with investors.
• Google Sheets : Does the model work in Google Sheets? Not all models that work in Microsoft Excel work in Google, so you may want to consider that point.
• Editable formulas : Some templates do not allow you to modify formulas - which is a massive bummer when it comes to customization.

Granted, it's not a perfect methodology. One could argue forever about whether cap tables should be included in a startup financial model. But it's the best I could come up with - without being a finance nerd myself :)

Disclaimers: affiliation, impartiality, and non-finito

Before jumping to the heart of the matter, please allow me three disclaimers:

• Affiliation: Some links in the article are affiliated - which means that if you end up buying a template through one of those links, OpenVC will get a few $$$. It doesn't cost you anything, and it allows us to keep writing useful articles for you.
• Impartiality: Regardless of whether there is a referral in place or not, I am committed to providing you with an honest opinion. We take great pride in being an independent, honest, and trusted source of information for entrepreneurs.
• Non finito: This is a non-finite work. We are happy to update the article if you bring new, relevant information to our knowledge. We are also happy to fix any mistake or clarify any confusion that you may find in the article.

1. "FISY Innovation Plan" by Remi Berthier

Fisy Innovation Plan, by Rémi Berthier

For years, this template has been the go-to financial model for French entrepreneurs. However, it didn't age that well.

Analysis capabilities are limited: only a handful of financial metrics, zero SaaS metrics, a couple of graphs, and it's impossible to categorize costs. Modeling, be it for revenue or costs, is all too basic and requires a lot of manual input. Also, it's entirely in French.

Having said that, it remains a free-of-charge, easy-to-use, easy-to-customize template that covers all the basics while including specificities to the French ecosystem such as CIR, JEI, etc. It also offers a detailed page of instructions on the website.

This model makes a lot of sense for French entrepreneurs looking for a simple solution. For the others, keep on reading.

Edit 2023: I've re-downloaded the template in 2023 and didn't notice any significant change versus the 2017 version I had initially reviewed, so I kept my review untouched.

2. "SaaS Financial Plan 2.0" by Christoph Janz

SaaS Financial Plan 2.0, by Christoph Janz

This template was built by SaaS apostle Christoph Janz, and you can tell. It packs a punch of SaaS knowledge in a sleek, clear spreadsheet. You'll find lots of good stuff: basic/pro/enterprise plans, churn/upgrade/downgrade, an elegant client acquisition model and a wealth of graphs and charts.

It's not all rosy, though. You want a 5 years forecast? No, you only need 2. You want to sell annual pro plans? Too bad, pro plans are monthly and that's that. Also, no balance sheet.

This template works great if you are a typical SaaS startup and fits the vision that Christoph put into his financial plan. If not, you may be better off considering templates with broader horizons.

Edit 2023: Based on the Dropbox information, the template has not been modified since my first review in 2017, so I kept it untouched.

3. "SaaS Financial Model 3.0" by Baremetrics

SaaS Financial Model 3.0, by Baremetrics

I reviewed this model for the first time in 2017, when Jaakko Piiponen was its sole author. Since then, the Baremetrics team has substantially updated it. This new 2023 review should finally do it justice.

This SaaS Financial Model 3.0 is geared towards people who want to pilot their SaaS business, as opposed to just raising funds. Its underlying philosophy is that you need to match actual numbers with your forecasts for maximum piloting accuracy. To reach that objective, this model wants you to frequently pull data from your accounting software (e.g. Quickbooks, Xero…) and will project many assumptions based on your last 3 months - what they call "Autopilot". It's a healthy approach, and if you're ok with the extra work, it may be the right one for you.

When it comes to financial statements, this model nails it: you get a monthly view of your P&L, cash flow, and balance sheet over 5 years. However, because this model is not designed for fundraising, it doesn't include a cap table, which may be a dealbreaker to some. The whole model is in USD - you can manually change to any other currency, but you'll have to click a lot….

The Baremetrics team has also beefed up the analysis capabilities. This new version packs up all the must-have financial and SaaS metrics (Churn, ARPC, LTV, Paid CAC, Blended CAC, CAC:Payback time, CAC:LTV, MRR Breakdown), plus 11 built-in charts. A very nice attention is the Chartbuilding tab, which groups all the numbers in a clean format so you can build additional custom charts effortlessly. Like Janz's and Murray's models, you can break down expenses by category (engineering, marketing, etc.). The icing on the cake: this SaaS financial Model 3.0 is the only free model of this benchmark that lets you build a "worst case scenario" on top of your base case - and of course, compare both scenarios to your Actuals. Kudos to that!

Revenue modeling and cost modeling follow the "Autopilot" philosophy described above, with a few notable twists. For instance, the Acquisition model can be augmented with a separate "Marketing funnel" sheet (also provided by Baremetrics, also free) that models a proper 7 step funnel (visitor, signups, MQL, SQL, opportunities, trial, customer) and distinguishes between paid and organic leads. Your CMO will love it. Similarly, each expense line can be tied to specific variables to reflect dependencies.

All in all, this model by Baremetrics is a very strong contender. The only weakness I found relates to modeling complex offers, such as a Basic, a Premium and a Pro plan. It's just not possible. Even modeling annual plans seems to take a bit of work using the "Deferred revenue" tab. On the upside, this SaaS Financial Model 3.0 models expansion, contraction, churn, and even reactivation, so it's a tit for tat.

If you're looking for a free model that cares about accuracy to pilot your SaaS business the year round, and you don't mind getting your hands dirty a bit, then this is the one. Support is limited to a well-written, opinionated page of instructions, and you can contact the creators on Twitter. The model is available on Excel and Google Sheets, and all the formulas are editable.

4. "Standard SaaS Financial Plan for Startups and SMBs" by Ben Murray

SaaS Financial Plan for Startups and SMBs, by Ben Murray

This template published by Ben Murray, AKA the SaaS CFO, has a lot in common with Chris Janz's model: it's free, it's SaaS-centric and it's really good overall.

But that's where similarities stop. Let's look at what differentiates them:

• Cost modeling: Janz does a much better job as many costs are tied to activity metrics. With Murray, you have to fill it all manually. Janz 1 - 0 Murray
• Commitment: Murray allows you to define which plans are annual and which are monthly. Janz does not. Janz 1 - 1 Murray
• Client acquisition: Murray wants you to manually input new clients each month, where Janz includes 3 acquisition channels. Janz 2 - 1 Murray
• Murray also allows you to add service revenue and offers up to 5 years of forecasts. Janz 2 - 2 Murray
• Since its latest update, Murray's model also allows you to input your actual number and compare them with your forecasts. Janz 2 - 3 Murray

At the end of the day, Murray's SaaS template is great - maybe the best amongst the free templates. It is a bit disappointing when it comes to modeling new client acquisition and costs, though.

To explore more powerful (and paid) templates, read on!

5. "SaaS Startup" by Pro Forma

SaaS Startup Kit, by Pro Forma

The SaaS startup kit is the first paying template we're looking at: one-time $99.

Because you're paying, you obviously get a lot more in return: balance sheet, cap table, GAAP/IFRS compliance, 161 currencies to choose from, a ton of financial metrics and graphs, and advanced capabilities to model your costs and your revenue, including for hardware startups.

Now, because we are paying, we are a lot pickier. And I see 3 problems with this SaaS Startup Kit. First, you cannot account for upgrades and downgrades (you can model churn, though). Second, you cannot break down costs by P&L categories or departments. Third, the formulas are "locked ' so you cannot edit them. That's a big problem if, like me, you like looking under the hood. But maybe you don't care?

All in all, I cannot tell you not to look at the SaaS startup kit. It has a lot going for it, and at $99, it's priced right. But if you can stretch your budget a little more, look at the next model - it may be the right one for you.

6. "SaaS Financial Model" by Taylor Davidson

"SaaS Financial Model" by Taylor Davidson

Let me start right off the bat: this "SaaS Financial Model" by Taylor Davidson is one of the best templates out there.

For $149, you get all the financial statements you may wish for, laid out over 5 years, and GAAP-compliant. Additional tabs are built-in for fundraising (assess needs and uses), valuation (ownership, DCF, waterfall exit, ROI), variants (simplified scenarios), and impact (for purpose-driven startups). Bonus point: the model works in Microsoft Excel and Google Sheets, supports all currencies, and is fully editable.

In terms of analysis capabilities, the template generates boatloads of financial and SaaS metrics, as well as 20+ beautiful graphs. Costs can be broken down by departments and P&L categories so you can make sense of all that good stuff. SaaS experts will especially appreciate the granularity provided by monthly cohort analysis - a rarity!

Modeling revenue and costs is extremely versatile. Instead of pre-modeling everything for you, the template provides you with very unique features (Pricing, Pipeline, Drivers) that allow you to customize it to your needs. Here are a few examples of what you can do:

• You can build as many subscription plans as you want.
• Contract length is not limited to monthly or annual but can be anything you want.
• Billings are separate from contract cycles, so can do an annual contract with quarterly billings, or 3-year contract with annual billings, or annual contract with monthly billings
• All costs, direct and indirect, labor and non-labor, can be tied to relevant activity metrics (revenue, headcount, etc.) which is what you would expect from this kind of template.
• All costs can also be tied that are *not* tied to an activity metric, say periodic costs that occur quarterly or annually, or costs that increase a % over time, or costs that are a % of salaries, or a % of revenues, for example. This is all built-in within the Drivers sheet and an absolute delight to use.
• For Enterprise sales, you can model a good old Pipeline in the Pipeline sheet and attribute different numbers of seats and "likelihood to close" to each deal.

True, it takes a bit of time to wrap your head around the internal logic of that model. But once you master it, there is virtually no limit to what you can do.

Thankfully, this financial model is well-documented. The website includes a long, detailed "Getting Started" page as well as specific articles and videos for technical points. The highlight is definitely the email support - I've consistently received detailed replies within 24 hours - at zero extra cost. Kudos to that.

Long story short - if you are willing to shell out $149 for a SaaS financial model, Taylor Davidon's template is arguably one of the absolute best you can get your hands on. The other one is the model built by Alexander Jarvis - read on to learn about it.

7. "SaaS: SME & Users" by Alexander Jarvis

8. "saas: enterprise, sme & users" by alexander jarvis.

"SaaS: SME & Users" by Alexander Jarvis

"SaaS: Enterprise, SME & Users" by Alexander Jarvis

It's hard to write a serious review about this template - everything about it is absolutely ridiculous. It is ridiculously rich, ridiculously detailed, ridiculously powerful. It's the kind of template that you use when you want to make a statement, like impress your investors or make your CFO feel irrelevant. It's heavy, bold, and over-the-top, in the best way possible. Brace yourselves, let's dive in.

This template by Alexander Jarvis comes in 2 versions. The "SaaS: SME & Users" is perfectly fine for most SaaS businesses. It sells at $319. The "SaaS: Enterprise, SME & Users" retails at $1,299 and includes extra logic to model enterprise sales. Because of their complexity, both models only work in Microsoft Excel (no Google Sheets).

In return for your money, you get the most advanced modeling capabilities - period.

• Each acquisition channel is modeled in great details: paid, organic, blog, social, emailing, and channel partners. Each channel can be assigned its own conversion rate from visitor to user. You can also differentiate between the customers that self-onboard and those who require sales intervention.
• You can design composite offerings based on usage fee, monthly fee and/or a one-time service fee. The templates allow 3 paid plans - typically basic, premium, pro - as well as a free trial plan, and each of these plans can exist with a monthly or annual commitment.
• Customers can upgrade, downgrade or churn, and you can even schedule module releases at different points in time, so you create new revenue streams over the years.
• All costs, direct and indirect, labor and non-labor, are modeled in a clever way i.e. they are tied to relevant activity metrics

I cannot stress enough how detailed this model is. Here is an example: the "email marketing" tab (yes, there is such a thing) takes into account 12+ inputs including stuff like the % of recipients who will share the newsletter with their friends. I love this kind of detail because it gives actionable points when thinking about execution. It also makes it easier to defend your numbers in front of investors because you can explain the underlying assumptions. If it's too much for you, you can always deactivate the advanced fields with the switch and focus on the core input.

If you buy the $1,299 version, you get an extra slew of tabs specifically dedicated to enterprise sales in all its complexity: enterprise-specific products and offerings, geographies, sales cycles, "land and expand", custom development, etc. If you are building the next Oracle or Palantir, that stuff alone is invaluable.

Documentation is ok. Instructions and comments are included inside the template, but not much in terms of FAQ/articles on the website. Having said that, I particularly appreciated the tutorial videos: one 28-min overview and 20 shorter videos that each cover a specific tab.

You want more? Time to talk about analysis capabilities. Alexander Jarvis' model is most lavish when it comes to that point. 50+ graphs are readily available - and that's without counting the sparklines that are peppered throughout the sheet. Because modeling is so detailed, the template can provide advanced SaaS metrics such as marketing leverage or expansion % of new MRR. Of course, costs can be allocated to P&L categories and departments so you really understand what's going on in your model.

When it comes to financial statements, the $319 version gives you only 3 years of forecasts, with no balance sheet and no cap table. The $1,299 version does a bit better with 5-year forecasts, but still no sign of balance sheet nor cap table. Some would argue that an early-stage startup doesn't need formal financial statements... However, this template does include a tab to compare your forecasts to your actuals, and another tab listing down industry metrics - both are very welcome additions.

If you want the best spreadsheet ever, it boils down to comparing Taylor Davidson's and Alexander Jarvis' templates, and picking the one that fits you the most. See the final section "Conclusion" for a side-by-side of both models.

However, some prefer using a specialized SaaS app to build their startup financial model. If that's your case, check out the last 4 models.

9. "EY Finance Navigator" by Alex and Wout

EY Finance Navigator, by Alex and Wout

The Finance Navigator was developed by Alexander Matthiessen and Wout Bobbink from EY's Dutch office. It's a SaaS app: you pay a monthly subscription to access an online tool. It's a fundamentally different approach from the spreadsheet-based models we've explored so far.

The Finance Navigator costs $30 per month without commitment or $380 over an 18 month period. For that price, you get very exhaustive financial statements: income statements, cash flow statements, and balance sheets over 10 years - no cap table though. All currencies are available and you can export the statements to a clean, well-designed spreadsheet format (only numbers, no formulas).

Documentation is good, with in-app guidance, website posts, a Q&A, and a 37 min walkthrough video. The tool was clearly thought to be user-friendly and the onboarding is best-in-class. You will have zero difficulties using EY's Finance Navigator whatsoever.

Unfortunately, simplicity is a double-edged sword. Revenue and cost modeling is super basic. For example, revenue is defined as a base number for month 1, then a monthly growth rate. No channels, no conversion rate, no pricing plans. The same goes for costs: you cannot tie costs to specific activity metrics, so you have to input them manually. Because it's a SaaS application, you cannot customize the model by adding fields or modifying formulas. And because it's so basic, there is only the bare minimum in terms of analysis capabilities.

At the end of the day, EY's Finance Navigator holds a lot of promises. UX is great and they have a couple of nice features like comparables and scenarios. The product has evolved over the years, adding up features and getting more usable. In my estimation, it's not quite enough to be used by advanced SaaS entrepreneurs. The product is geared towards traditional businesses - think bakery, restaurant, consulting, who just want clean and easy financials. Not the right pick for SaaS people - yet. I'd love to revisit the tool in a year and see what progress has been made.

10. "Liveplan" by Palo Alto Software

Liveplan, by Palo Alto Software

Liveplan sells its financial modeling SaaS app at $20 per month ($360 over 18 months), which makes it a close competitor to EY Finance Navigator.

Starting with the strong points, Liveplan offers exhaustive statements over 5 years: income statements, cash flow statements, and balance sheets. Compared with EY's model, you have a bit more control over revenue modeling: offerings can be defined as recurring fees, billable hours, and a one-time upfront fee can also be added. Pricing can be increased automatically over time, churn can be factored in, and you can model monthly or annual plans.

When looking at cost modeling, you can adjust payment terms for clients and suppliers. There are also specific variables for hardware products. Documentation is just fine, with a tutorial video per section embedded directly in the app, as well as plenty of instructions. Liveplan exists in 5 languages, and integrates with Quickbooks, which allows importing your actual numbers and comparing them with your forecasts. You can also export your financials into a (numbers-only) spreadsheet to share with your investors.

Now, although Liveplan's software has more powerful modeling capacities than EY's, it remains insufficient in my estimation. Here are just a few examples.

• Direct labor costs can be set as a % of revenue, but do not update the number of employees accordingly.
• Indirect costs can only be set as a constant, a % of overall revenue, or a % of a specific revenue.
• New client acquisition is just manual input - as in you manually input "2" clients in March and "4" clients in April. There is no channel modeling whatsoever.
• Costs cannot be broken down by P&L categories nor departments.

When modeling is too superficial, it translates into poor analysis capabilities. In Liveplan's case, you do have a dozen financial metrics available (net cash flow, account payable, cash on hand…) and another dozen graphs. But SaaS metrics are absent, which is a bummer for SaaS entrepreneurs.

At the end of the day, LivePlan was built for non-tech entrepreneurs. Perfect for a bike shop owner, but not quite there for SaaS people.

Don't take my word for it: there is a 60-day trial, so give it a spin for free and make up your own mind.

11. "Summit" by Matt Wensing

Summit, by Matt Wensing

Summit is a young startup (founded 2019) that brings a fresh take on the whole financial modeling thing with a SaaS solution.

Let's make it clear - Summit is not meant for fundraising. Forecasts on Summit are made for an 18-month period only. Costs cannot be allocated to P&L categories and departments, nor can you differentiate between labor/non-labor or direct/indirect costs. Therefore, you won't be able to generate any financial statements that your investors may require . Hell, you can't even export a spreadsheet!

So why talk about Summit? Because Summit is pretty awesome when it comes to piloting your SaaS startup with a financial model. Here is how it works. First you connect your live metrics (Stripe, Baremetrics, etc.) to your Summit account. This allows Summit to derive your future growth from the current trends. The next step consists in optimizing that future growth. To do that, you define a baseline scenario around 20+ metrics from sales, product, finance, then you play around with those variables to maximize your MRR or any other metric you like. What if we increase our close rate? What if we raise funds and funnel that money into paid ads? You instantly get clear answers. What's more, the clean dashboards and convenient built-in comments feature makes it easy and even pleasant to run those analyses and share with your team. It's a really fresh experience - no comparison possible with fuddy-duddy spreadsheets.

Summit is still a young product and there is room for improvement: currencies, tax rates, expansion and contraction of existing clients, one-off revenue. In particular, client acquisition would greatly benefit from more granularity and native integrations with social media accounts for instance.

At the end of the day, Summit is not meant to build financial statements, but to make decisions in a data-driven way. It's such a refreshing approach in the space that I highly recommend trying it out. Bonus point: it's 100% free for now, so it's a no-brainer.

12. "Causal" by Taimur and Lukas

Causal, by Taimur and Lukas

At first glance, Causal seemed very similar to Summit. It's also a SaaS solution, also founded in 2019, also bringing a new approach to modeling. But that's where the comparison stops because the philosophy behind Causal is quite unique.

Causal is not just a financial modeling tool for SaaS startups. It's a modeling tool that aims at replacing Excel for every modeling need you may have. This means that (a) Causal is super versatile and goes much deeper than Summit, and (b) Causal is much more complex with a steeper learning curve than Summit.

Looking at revenue and cost modeling, you can model anything you want on Causal with an interface that's 10x more modern and user-friendly than a spreadsheet. The same thing goes for analysis capabilities: you can generate dashboards, tables, and graphs for absolutely anything - including any financial statement your investors may want. You can also connect live data sources (Stripe and Google Sheets for now, more to come) to automatically update your models with real-time metrics.

As a SaaS entrepreneur, you don't have time to build a model from scratch. Lucky you, Causal has built-in templates - including two SaaS models built by Taylor Davidson himself (see template #6). You are then able to augment or fine-tune those models to suit your specific needs.

In terms of documentation, there are a few videos, a live chat as well as a walkthrough when you start a new model. That's not much, but Causal assumes that you are a modeling "nerd" and that your usual work environment is massive spreadsheets. If that's the case, you'll be just fine. Assuming you have the time and desire to put in the hours to learn a new tool, Causal may very well be the ultimate platform for financial modeling.

New models - reviews coming soon

"financial model template for startups" by basetemplates.

Financial Model Template, by BaseTemplates

Conclusion: this is the best financial model for SaaS startups

Best free spreadsheet

If you want a "good enough" model but are not willing to pay for it, go for Ben Murray's (model #4) or Chris Janz's (model #2) . Customize them a bit to offset their weaknesses.

See below a side-by-side comparison of the differences between both models.

Best paid spreadsheet

If you want the best financial model spreadsheet out there and are willing to pay for it, go for Taylor Davidson's (model #6) or Alexander Jarvis' (models #7/#8) . They are by far the best stuff on the market today.

See below a side-by-side comparison of the differences.

Best software

If you want to experience the future of financial modeling, go for Summit (model #11) or Causal (model #12) - while keeping in mind that both are very different.

Thanks for reading. Don't hesitate to leave a question in the comments, I try to reply personally to each one of them.

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Home > Industry Templates > Saas Revenue Model

Saas Revenue Model

The saas revenue model is one where a customer pays a periodic subscription fee for the use of centrally hosted software and support instead of purchasing the software outright.

This saas revenue model spreadsheet provides a quick and easy method to estimate revenue generated by a saas subscription model for the next 5 years. The revenue forecast generated can be used as starting point for our Financial Projections Template for inclusion in a saas business plan.

Using the Saas Revenue Model Spreadsheet

• Enter the customer additions for month 1 . To start the saas model calculations, an estimate of the number of new customers (additions) for month 1 is required.
• Enter the opening number of customers . Enter the number of paying customers that the saas business has at the start of year 1. For a new business this will be zero.

For each of the five years the sass revenue model spreadsheet calculates the number of customers at the start of the year, the number which were lost during the year, the new customers which were added during the year, and finally the number of customers at the end of the year.

It should be noted that although the customer numbers are summarized and shown on an annual basis, they are in fact calculated by the saas revenue model spreadsheet on a monthly basis.

• Enter the monthly subscription fee . For each year enter the average monthly subscription fee paid by the customer for the use of the software. If more than one subscription fee is charged, a weighted average should be used.

Saas Revenue Model Spreadsheet Download

The saas subscription model template is available for download in Excel format by following the link below.

The saas revenue model forecast produced by this template can be used as the starting point for our Financial Projections Template , as part of a saas sales model business plan.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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SaaS Business Financial Model

The SaaS Business financial model offers valuable assistance in preparing a budget and multi-year financial plan for a Software as a Service (SaaS) business that acquires new subscribers via its website. The model focuses on modeling B2C Subscription Businesses where users are assumed to sign up to 4 different pricing tiers and can choose between two payment plans (monthly and yearly).

The Excel model collects all the relevant assumptions and then prepares a comprehensive budget and multi-year financial forecast, which can be used to raise funding from equity investors. This Excel spreadsheet template calculates all the relevant key metrics for SaaS Businesses and Startups, such as the required funding, the Internal Rate of Return (IRR), Net Present Value (NPV), Monthly Recurring Revenue (MRR), Average Revenue per User (ARPU) Projections, Customer Acquisition Costs, Customer Lifetime Value and many other important metrics.

The spreadsheet is essential for obtaining deep insights into SaaS Subscription Business economics and quickly understanding its value drivers while developing a comprehensive financial plan that serves as a basis for discussions with capital providers when raising new funding.

Important: This SaaS Business Financial Model Template has been recently updated to Model Version 8.1 . Customers who bought model version 7.0 or higher are entitled to a 30% Upgrade Discount. Contact us if you don’t see it applied to your carts upon login .

The SaaS Business Financial Model Template prepares a monthly budget and multi-year financial plan (5-10 year forecast period depending on the model version) for mainly a B2C Software as a Service (SaaS) Business or a Startup Venture. The Excel model uses a bottom-up approach to estimate the number of new sign-ups from 5 different traffic sources (direct, organic, paid ads, referrals from word of mouth and affiliate partners), trial users, the conversion to paying subscribers, and subscription revenues obtained from four different price tiers and by using either monthly or yearly payment plans. The model calculates the monthly and annual financial statement forecast and all relevant metrics to evaluate the financial feasibility of the SaaS Business Startup.

The objective of the financial model is to assist entrepreneurs with preparing a solid financial plan for their business and offer deep insights into the economics of a company’s financial prospects. The financial plan can then serve as a basis for investors and stakeholders to understand the financial prospects of the SaaS Venture.

Assumptions are marked in blue for easy reference, and the model offers many charts and graphs. The following video provides a walkthrough of the SaaS Business financial model template in Excel:

Modeling Recurring Revenues from B2C Subscription Businesses with Ease

The highlights of this Excel model template are the following:

1. Subscriber Acquisitions by Traffic Source: 

• The SaaS Business template models new user acquisition from 5 traffic sources – Direct, Organic, Paid Ads, Referrals from Word-of-Mouth, and Affiliate Partners.
• The allocated advertisement budget drives new users from paid ads, while referrals depend on assumptions regarding the expected Word-of-Mouth referrals and Affiliate Partners.

2. Customer Acquisition Costs: 

• The model offers profound insights into the resulting Customer Acquisition Costs from paid ads, which can vary over time. It provides a variety of charts to understand such things and compares them to understand customer acquisition costs vs. customer lifetime value.
• Customer Acquisition Costs are separated in the company’s Income Statement from Direct Costs, making the relationship between Gross Profit and Acquisition Costs easy to understand.

3. Trial Users, Conversion to Paying Subscribers, and Churn Rates:  

• When preparing the financial forecast, the template allows trial users and a time lag (in months) from trial to paying users.
• Conversion rate assumptions will calculate how many trial users will be converted to paying customers.
• Annualized Churn Rates (the counterpart to Retention Rates) assumptions model the number expected to renew subscriptions at the end of their term.

These assumptions can vary year-by-year, offering the possibility of assuming expected operational improvements over time.

4. Four Pricing Tiers and Two Payment Plans: 

• The Excel spreadsheet separates subscribers into four different price tiers – Basic, Pro, Premium, and Platinum. The price tier labels can be changed.
• Subscriptions can be split into 2 payment plans – monthly and yearly.
• The model offers the option to record revenues from yearly upfront payments received in the month of payment or allocate its revenue equally to each month of the annual subscription period purchased.

5. Customer Lifetime Value: 

• The SaaS model provides a Customer Lifetime Value analysis of paying users and is split by monthly, yearly, or average subscribers.
• Various charts provide deep insights into how Customer Lifetime Value is expected to evolve and how the multiple referral programs and their corresponding commission schemes affect its value.

6. Monthly Budget and Multi-Year Financial Planning: 

• The SaaS Business Financial Model Template turns a set of assumptions into a monthly plan whose results then get aggregated into a solid multi-year financial plan.
• This allows users to obtain a budget for the first year and a multi-year financial plan simultaneously. The forecast horizon is 5 to 10 years (10 years for the Premium model version) and can form the basis for a SaaS business plan.

7. Comprehensive Financial Statement and Free Cash Flow Forecasting: 

• The model prepares a three-statement forecast on a monthly and annual basis: an Income Statement , Balance Sheet , Cash Flow Statement , and Free Cash Flow Forecast.
• From these tables, an extensive number of financial ratios are being calculated that can be used to analyze and better understand the business case and its financial prospects over the foreseeable future.

8. Business Valuation Forecast that Shows the Business Potential: 

• There are 3 available different multiples (EV/Revenues, EV/EBITDA, or EV/Subscriber) to forecast the business value into the future.
• This feature shows the full valuation potential and models the expected exit value upon investor exit.

9. Key Performance Indicators (KPIs) and Financial Metrics Indicate the Business’ Prospects: 

This SaaS Financial Model Template calculates all the relevant Key Performance Indicators of SaaS businesses. They include:

• Monthly Recurring Revenues (MRR),
• Annual Recurring Revenues (ARR),
• Average Revenue per User (ARPU),
• Churn and Retention Rates,
• Customer Acquisition Costs and
• Customer Lifetime Value.

In addition, the model calculates financial feasibility metrics such as the funding required, Internal Rate of Return (IRR), Payback Period, and Cash on Cash Yield for new Startups. The Premium Model Version also includes a Break-Even Analysis for prices and volumes for a specified forecast year.

The aim is to provide sophisticated investors with a comprehensive set of relevant metrics so they can quickly understand the financial attractiveness of SaaS Subscription Businesses.

10. Multiple Funding Rounds – From Seed To Series A,B,C:

• The template offers the option to plan multiple funding rounds (depending on the model version) from Equity Investors.
• This feature allows users to split the required financing requirements into funding phases such as Seed, Series A, Series B, and Series C and understand their effects on the implied Pre- and Post-Money Valuations, Dilution of Equity Shareholders, and anticipated returns of investors.
• The model also calculates expected investor returns based on a cash flow forecast at the investor level (Only Premium Model Version).

11. The VC Valuation Method can be used to substantiate the Investment Propositions: 

• The results of the post-money valuations can be checked using the venture capital (VC) valuation method (Premium version) only. The VC Valuation Method uses the Equity value at the expected exit of investors and derives the pro-forma Equity Value today by using the investor’s anticipated annual target return.
• This method allows users to obtain additional insights into the range within which a Post-Money Valuation might need to be acceptable to investors based on the underlying financial plan scenario.

12. Rich Features Throughout this Model: 

• The model offers many rich features for measuring employee costs, operating expenditures, capital expenditures, and investments in intangible assets.
• It also includes a debt schedule for several layers of financial debt.
• Other assumptions offered in the model address Net Working Capital Requirements, Depreciation and Amortization periods for fixed assets, interest rates, and cost inflation assumptions.

13. Scenario Analysis:

An Executive Summary offers a range of scenario parameters (NEW All Model Versions) that allow quickly simulating essential changes in key assumptions and directly seeing the effect on the resulting financial plan and its key metrics.

This allows users to simulate a nearly limitless number of scenarios to better understand the range of outcomes.

14. Summaries with Charts and Tables for Presentation Slides :

The SaaS Business Model spreadsheet templates come with detailed and condensed summaries to quickly grasp the key financial metrics of SaaS Businesses and offer the ability to drill down into their determinants.

This offers transparency and a deep understanding of all aspects of the logic of Subscription and Service-as-a-Software Business. The Premium Model Version provides tables for presentation slides.

Robust Model to Understand the Economics of a B2C Software-as-a-Service (SaaS) Business

This Excel spreadsheet template focuses on modeling B2C SaaS Subscription businesses that obtain subscribers via sign-up on their website and convert them into recurring subscribers. The SaaS financial model then offers the relevant assumptions to calculate a comprehensive economic forecast and derive all the appropriate metrics.

The robust SaaS business model comes in three different versions, each as a fully editable Excel file.

The financial model template comes pre-filled with an example forecast of a SaaS business to illustrate clearly how the spreadsheet works. The forecast can be easily changed by altering the assumptions in blue and light blue font color.

The fully editable Excel model versions are currently in version 8.1. A free downloadable PDF demo version is available to help you understand the model structure.

File Types: .xlsx (MS Excel) .pdf (Adobe Acrobat Reader)

Gain a competitive advantage in your new SaaS Startup Business or existing Subscription business with our meticulously crafted financial model. Navigate the intricacies of SaaS financial planning and unleash your business’s full. Empower your investment decisions with precise forecasts and data-driven insights to ensure your venture thrives.

•   Premium Excel Model  –  $199.95 Version 8.1
•   Pro Excel Model  –  $149.95 Version 8.1
•   Basic Excel Model  –  $99.95 Version 8.1
•   PDF Demo  –  $0.00 Version 8.1

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The SaaS financial model was useful to support financial analysis.

36 of 78 people found this review helpful.

Help other customers find the most helpful reviews

Did you find this review helpful? Yes No

By fasih kareem on January 27, 2021 at 13:41 (Verified Purchase)

I was in need of SAAS model and hasn’t got a time to build from scratch. Been searching online a good version of model and found a SAAS Financial model from eFinancialmodel very detail oriented and have more metrics to track also breakeven and sensitivity analysis makes this top SAAS model in my list, would definitely recommend.

812 of 1612 people found this review helpful.

By Manuel Afif on November 30, 2019 at 12:28

The excel is fine bur wouldve liked to have more info on how to fill each of the cells. I am doing a business model for school so im no expert. I woulve wanted to have someone explain me how to fill the model step by step.

1184 of 2354 people found this review helpful.

By EFM Support Team on December 17, 2019 at 08:14 (Verified Purchase)

Hi there. We understand your predicament but please keep in mind that we only sell financial model templates and provide custom financial modeling services/assistance. Our financial modelers are occupied with projects, as such, we could not conduct a one on one lesson on how to fill up the model template. We do, however, accept any email inquiries to understand the template and answer your questions. There is also a video in the description above to help you familiarize yourself with the template and instructions within the template.

If you have any further questions, please feel free to email us at [email protected] and we’d gladly assist you. Cheers!

877 of 1681 people found this review helpful.

By eFinancial on May 12, 2020 at 17:01

The model update to version 7.0 should address this as instructions are included now.

849 of 1681 people found this review helpful.

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More From Forbes

Choosing saas providers: essential factors for smbs to consider.

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When shopping for services, small businesses and startups often focus first on cost, but that’s not the only important consideration when looking for a software as a service vendor. The right technology tools can streamline processes and help SMBs better serve their customers—crucial factors in determining whether a business survives and thrives or goes down in defeat.

It’s vital to carefully vet SaaS vendors to not only get the maximum ROI on a critical investment, but also to establish a long-term partnership that can support your growing business in the years ahead. Below, 20 members of Forbes Technology Council discuss essential factors an SMB should carefully consider when choosing a SaaS provider. Paying attention to these details ensures the technology tool you choose is the right fit for your unique organization.

1. Platform Flexibility

Since every small business aims to reach the next level, I recommend asking potential vendors, “How flexible is your SaaS platform in terms of technology and customer support—can it adapt to our business as it grows?” Focus on scalability to handle growing operational needs, integration with existing tools, customization for changing requirements and responsive support for quick issue resolution. - Cristina Gupca , Key IVR

2. Customer Support Systems

While costs cannot be overlooked, I think it’s essential to understand the kind of customer support one can expect from the vendor in question. Many SaaS vendors sit in the critical paths of their customers’ products, so it is crucial to know whether the vendor provides robust service-level agreements and a direct line to their technical staff when things go wrong. - Aayush Shah , Blacksmith

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024, 3. long-term contracts.

One essential question small businesses and startups should ask a potential SaaS vendor is, “What incentives and support do you offer for long-term contracts?” While SaaS can initially ease cash flow, over time, it could become more costly than on-premises solutions. Comprehensive environments and additional modules from one vendor can be more cost-effective. - Adrian Stelmach , EXPLITIA

4. Vendor’s Security Architecture And Longevity

I think there are two essential issues. The first is all about security, and it’s especially important for small companies. You need to understand whether a SaaS product is introducing vulnerabilities by thoroughly assessing the vendor’s security architecture and knowledge. The second issue is the vendor’s longevity. Very low pricing may be unsustainable; if they go out of business, you’re left vulnerable and without support. - Teri Thomas , Volpara Health

5. Vendor’s Company Culture

For me, an essential question is whether the vendor is a fit for your company’s culture and whether they will be an extension of your team. Far too often, we focus on technical aspects when something far more simple—such as asking yourself, “Would I hire these people to work with on a daily basis?”—can make a massive difference. - Dileep Marway , AND Digital

6. Whether (And How) The Tool Saves You Time

While cost is a key driver, for a small business or startup that’s considering value, the larger consideration is, “How does this enable or empower my team or company to do more?” In a smaller company or startup, it’s the drain on the employees’, founders’ and/or management team’s time that is a growth constraint. By focusing on freeing up time through tools where possible, you will further drive your growth. - Robert Chapman , 101 Solutions

7. How The Vendor Stacks Up To Competitors

Data integrity, service reliability, customer support, receptiveness to feedback and continuous improvement are all important to me. When meeting with a prospective SaaS provider, I would ask, “Your SaaS competitor may come to me in a year with a better price proposition than yours. What can you say to me today that will persuade me to say ‘no’ to them?” - Oliver Tan , ViSenze

8. Self-Service Capabilities And Support

For SaaS AI solutions, I would have questions about self-service capabilities. Can I fix, update and maintain the solution with my own team? What kind of data and AI expertise would we need to do so? Will the vendor provide education for my team? If not, what are the time and money costs to my organization for the vendor to carry out fixes, updates and maintenance? If these questions aren’t answered, you won’t know how to fix the AI solution if it no longer meets your needs. - Zehra Cataltepe , TAZI AI

9. Vendor’s Customer Success Stories

Ask about their customer success stories and service adaptations for unique business needs. This reveals their flexibility and commitment to client growth. Look for examples of customized solutions and creative problem-solving. A vendor showcasing diverse success stories demonstrates an ability to pivot with your evolving business, ensuring a partnership that scales with your ambitions. - Bhanu Jagasia , bladestack.io

10. Scalability

The key factor is scalability. While cost efficiency is certainly important for small companies and startups, the true priority should be finding a SaaS solution that offers scalability, flexibility and composability so that the tool can grow in tandem with the evolving needs of the business. - Steve Rodda , Ambassador Labs

11. Vendor’s Roadmap

For a strategically important solution, the key question is, “What is your roadmap?” The reason this is the most important question is that the answer will indicate whether the vendor is going to continue supporting your most important needs or is evolving its solution in a direction that’s moving away from your core needs. - Maria Scott , TAINA Technology

12. How Your Data Is Used

Today, it’s more important than ever for businesses to understand where their data is going and how it’s going to be used. Organizations need to conduct their due diligence to evaluate vendors and determine if they’re equipped to meet their needs. Often, if something “as a Service” looks too good to be true, whether in terms of price or functionality, there’s a catch! - Mike Lefebvre , SEI

13. How Your Data Is Protected

Small businesses and startups should ask, “What security measures do you have in place to protect our data?” This is a crucial question, as data breaches can be costly and damaging. Understanding the vendor’s security protocols ensures that sensitive information is protected, which is vital for maintaining customer trust and compliance with regulations. - Vishwanadham Mandala , Cummins Inc.

14. Feature Requests And Product Updates

Ask, “Can you describe your process for handling feature requests and product updates?” Small businesses need to know how responsive a vendor is to their evolving needs and whether the SaaS can adapt quickly to market changes or specific requirements. - Sriram Panyam , DagKnows

15. Vendor’s Customers Within Your Industry

The key question to ask the representatives of a SaaS vendor is whether they have a customer in your industry that they could introduce you to. In conversations with those customers, you can glean information that isn’t necessarily publicly available, such as the responsiveness of the vendor’s customer support team, how easy the software is to use, and the overall value and experience of the vendor. - Itai Sadan , Duda Inc.

16. Short-Term Expectations For Results

It’s important to ask, “What does success look like in six months, and what is the expected outcome for us in six months given what you know about the problems our organization experiences?” No matter how well-focused a vendor is, there is diversity in a customer base and, therefore, differences in the expected results for adopting the solution. - James Ding , DraftWise

17. Innovative Features

One essential question small businesses and startups should ask a potential SaaS vendor is, “How does your platform support and drive innovation for businesses like ours?” Understanding how the vendor’s solutions can adapt, scale and offer innovative features is crucial for ensuring the business can stay market-competitive, leverage new technologies and continuously improve its offerings. - Jo Debecker , Wipro

18. Tool Consolidation

SMBs should ask for a solution that consolidates business tools into one platform. This integration eliminates the need for multiple, disparate systems, streamlining operations and saving time, money and resources. It allows for seamless data flow between different functionalities, reducing manual data entry and the risk of errors. A SaaS solution that can scale and grow with SMBs is also crucial. - Itzik Levy , vcita

19. Long-Term Collaboration

Ask, “Can you be a long-term partner in our growth journey?” Look for providers who take the time to understand your unique needs, offer flexible solutions and provide ongoing support. An open API is particularly valuable, as it enables you to build a customized and evolving tech stack. The ideal SaaS vendor should work collaboratively with you to solve current problems and scale with your growing business. - Savneet Singh , PAR

20. Encryption And Key Management

Ask potential SaaS vendors about encryption and key management. Does the vendor allow customers to bring their own keys? Being required to rely on the SaaS provider for both encryption and key management is not ideal; “separating lock and key” is critical for security. Using a single vendor for both is the equivalent of writing the combination to a padlock on the padlock. - Bruce Kornfeld , StorMagic

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The 10 Best SaaS CRM Software

Published: August 07, 2024

The secret's out: behind every “How do they do it all?” SaaS worker is a CRM platform holding their life together. If you're new to the world of CRMs, then prepare to have your world turned upside down.

I distinctly remember the day I learned about CMRs: I was using a spreadsheet for my contact management, and I felt like other people maintained their networks better by sheer luck. When someone on LinkedIn casually mentioned their CRM, it was like I was given superpowers.

Everyone needs a CRM, but SaaS teams have an above-average need. Delivering a product to a global audience in highly competitive fields requires impeccable organization, constantly improving customer retention, and top-tier relationship management — and some assistance from AI and automation can only help.

But what is the best CRM for SaaS companies? Today I'll walk you through the most popular SaaS CRM solutions on the market to help you find the best tool for your needs.

Table of Contents

What Is a SaaS CRM?

What is the difference between a crm and a saas crm, benefits of using a saas crm, the best saas crm software, finding the perfect crm for your saas company.

CRM stands for “customer relationship management” system. The term " SaaS CRM " refers to CRM software specifically tailored for software-as-a-service (SaaS) businesses.

An effective CRM is make-or-break for SaaS companies because of:

• Customer Retention . 47% of polled businesses said that the use of CRM software had a significant impact on their customer retention.
• User Experience . 85% of customers say they‘re willing to spend more on a SaaS tool if there’s good customer service.
• Long-Term Investment . CRMs aren't going anywhere. The CRM market size is expected to grow to $262.74 billion by 2032 , a 12.6% increase from 2024. This is an investment that will stand the test of time.

To stay competitive, every SaaS company needs CRM software in its corner that helps bring in leads, keep customers happy, and facilitate growth. Here's what that looks like.

Read our full guide on how to use CRM software here: How to use CRM software .

HubSpot's Free CRM Software

Free CRM Software & Tools for Your Whole Team

• Customer Service

Customer relationship management tools are generally not specialized for SaaS companies alone, but they understand SaaS needs because most CRMs are SaaS companies themselves . You could say that CRMs are built by SaaS for SaaS (since every CRM uses its own product), even though they market to all businesses.

Long gone are the days of buying new CRM software and installing it on a CD-ROM (or having a technician come install it on your system for you). With a cloud-based CRM platform, you can download software from the cloud and get instant access — but it needs to meet your unique needs:

• Pleasant User Experience . With remote and global teams, SaaS companies need a software solution that every team member will want to use. Dispersed teams can‘t afford to have a CRM that sales and marketing teams don’t actually put their data into.
• Data Powerhouse . Data collection, visualization, and analysis are crucial for scaling SaaS companies.
• Growth Potential. No team wants to jump CRM programs every few years when they outgrow their system. SaaS startups need to choose a CRM that meets them where they're at now and can keep up with projected growth over the next five and 10 years.

Underneath the CRM iceberg is an almost overwhelming amount of tools, features, and benefits. Here are the benefits that matter most to SaaS workers.

Reduced Customer Churn

Every business fights customer turnover, but this is an even bigger issue in the SaaS industry because your competitors are just a click away . And according to statistics, it only takes one bad customer service experience for 13% of customers to leave. With the right SaaS CRM software, fewer customers fall between the pixels.

Streamlined Tools

There's a unique application for every business need, but opening endless accounts, maintaining user profiles, and paying for dozens of different platforms wastes time and money.

A good SaaS CRM solution will consolidate programs with native tools , such as data aggregation, AI, and marketing automation.

Creation of a Centralized Database

Software is a roller coaster world with cycles of explosive growth and devastating waves of layoffs. You need to be as agile as ever to react to shuffling personnel, the mass onboarding of new employees, and restructuring teams.

2022's Great Resignation increased tech's employee turnover rate by more than 600% , and that‘s only one of the hiccups we’ve experienced in the 2020s. What‘s next? A SaaS company isn’t future-proof without a centralized database of customer data, leads, and contact information. This is an essential safety net underneath your constantly-shifting employee base.

Data Aggregation and Analysis

Remember the days of manual data entry? Or have you repressed these memories? Now data presents a new challenge: there's an excessive amount to sift through and interpret. A good SaaS CRM will help enormously.

Your CRM can gather data and make suggestions for enhanced decision-making. This can be big-picture, like revenue planning, or in the minutia of your day-to-day, like letting you know that a lead opened your email and telling you when to follow up.

24/7 Mass Communication

Unlike a brick-and-mortar business, you have a global audience that requires 24/7 communication.

With the right CRM, you get tools for sending emails and text messages to potential customers worldwide based on their personal customer information (without you having to set reminders on your phone or check your notes for the correct time zone). Some CRMs will even display the local weather of your leads to help you personalize your communication.

Reduce Costs

SaaS sales teams that use the right CRM will see reduced costs in many areas: reduced number of lost sales, wasted time, and the cost of paying for a product that isn't helping you enough.

A new CRM system is a productivity investment, and it's considered the most valuable software according to financial planners, but you won‘t see ROI immediately. This makes your SaaS CRM decision even more important. Let’s look at the most popular options.

Marketing automation, lead generation, and an improved sales pipeline are at your fingertips. Here are the top CRM for SaaS companies for you to consider for your business.

1. HubSpot CRM

Integrations are available for every area of business and productivity: HubSpot, Gmail, Slack, Asana, LinkedIn, Trello, and more. Browse the automation library or set your own custom automation for emails, reminders, sending summaries of project changes, etc.

Pricing note: the lowest pricing tier listed is $12 per seat per month, but note that you must pay for a minimum of 3 seats per month. The lowest investment you can make for Monday Sales is $36 per month when billed annually (this price goes up to $45 per month when billed monthly). This confusion is a pain point reflected in customer reviews .

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