Enterprise SaaS Financial Model - Up to 3 Contract Configurations
Originally published: 19/11/2020 14:03
Last version published: 23/04/2021 19:35
Publication number: ELQ-83578-2
View all versions & Certificate

Enterprise SaaS Financial Model - Up to 3 Contract Configurations

A 5-year monthly and annual financial model for enterprise SaaS organizations.

This is the only SaaS template I have built that allows for customers to be on varying contract lengths (1-60 months). The user will now be able demonstrate the existence of month-to-month customers and/or customers with varying contract lengths as well as the value of each contract period, whether it be 1 month or 18 months or what have you. Also, a retention rate applies to each contract to calculate cohort renewals and churn therein.

This model has levers that make it possible to achieve negative churn, depending on the assumptions entered (uses #8 below) and works in conjunction with retention rates to see if more revenue is earned from customers that are retained compared to revenue lost from customers that leave. The aggregate result of all cohorts is then populated in a $ value and shows up in a visual chart.

The user now has a granular way to show how various customer types can scale with simple inputs. The model has up to 3 configurations for customer contracts.

They include:
1. Start month
2. Average length of contract in months
3. Starting customer count
4. Organic growth of customers - can change each year
5. Ad spend - can change each year
6. Cost per Acquisition - can change each year
7. Average contract value - can change each year
8. % Increase in contract value at renewal
9. Retention rate on contracts - can change each year

Many of the assumptions that change each year will have a '% improvement' input that drives how they change.

Some of the unique features and logic structures that show up in this SaaS financial model that are not often in other models include:

1. The idea of retention rate driving churn.
2. The ability to dynamically drive customer count of each monthly cohort for each contract configuration independently.
3. Having a credible way to raise the initial contract value for each renewal event in the life of a cohort while referencing the contract value of customers (which can vary based on the year a cohort of customers joined).
4. Allows for all the complex recurring pieces of SaaS revenues to shift dynamically based on varying contract lengths that are not pre-defined.

For expenses, there are two types of areas that work off of ratios. They include two types of Customer Support persons and two types of Sales Persons. Each scale dynamically based on expected existing customers (for CS) and expected monthly new customers (for SDRs).

The rest of the model is wrapped in the regular financial logic structures I include in most other models. The user can define the start year, exit month, debt or investor funding, cash distributions therein, DCF analysis, IRR, equity multiple as well as a lot of visuals for KPIs related to SaaS organizations.

KPIs include: CaC, LTV, LTV to CaC ratio, Months to Pay Back CaC, Average monthly churn (could be positive or negative), and average % customer churn (all of these metrics are shown on a monthly level and average annual level).

On a side note, DON'T BE AFRAID OF DECIMALS. It is actually the most accurate way to forecast revenue if you have decimals for customer count. Obviously you can't have half a customer, but the point of a forecast is to represent the best estimate of potential revenue/profit based on the assumptions. Rounding a customer count from 2.5 to 3 or 2.5 to 2 gives a less accurate number than just putting the decimal value that results from the formula and apply that as the basis for revenue generation. It means you may be somewhere between 2 and 3 in that case and the best way to mathematically show the value of that is by using the decimal. The same goes for Sales Persons and Customer Rep Persons.

This Best Practice includes
1 Excel template and 1 tutorial video

Acquire business license for $160.00

Add to cart

Add to bookmarks


Further information

Forecast the financial performance of an enterprise SaaS organization.

If you can boil customers into 3 or less types.

If you can't boil customers down into 3 configurations or less.


  • Be the first to review this Downloadable Best Practice

    Write a review


More Best Practices from Jason Varner

See all

Any questions on Enterprise SaaS Financial Model - Up To 3 Contract Configurations?

The user community and author are here to help. Go ahead!

0.0 / 5 (0 votes)

please wait...