With the rise of Software as a service business model in the industry, the number of developers wanting to build their own SaaS business kept on growing. Due to this, there is a need to build a SaaS Financial Model to ensure proper financial management and use it as a tool for fundraising, forecasting, etc. The question is – how to build a SaaS financial model?
First you need to draft assumptions to test different circumstances that would affect the business. Next would be to build a revenue forecast. As a SaaS business, your monthly recurring revenue will be your key metric. Then you need to map expenses to the revenue forecast to come up with a cost forecast tied to your revenue sheet. Now you need to create the essential elements needed for the three statements. The next step is to create a multi-year income statement. With this, you’ll be able to get an overview of your business’ health. This will also be used as a reference for potential investors and stakeholders about your business.
Developing a statement of cash flow is also critical for your business since it will give you an insight on how you can better manage not just the expenses but also ways to yield more earnings. Lastly, visualize the key pieces of the needed SaaS data together in a chart to get a better look of the performance of a business. This in turn will be greatly appreciated by any user as it is very convenient and makes the financial model easy to understand.
Of course, the best plan is a plan that’s plausible, realistic, and actionable. Therefore, being honest in taking your key metrics and figures will help you better in your decision making. If you want to try building a SaaS financial model, start off with a SaaS Financial Model Template first to guide you and let yourself familiarize on what a SaaS financial Model looks like and how it works.