SAAS Financial Model

Description
SaaS financial modeling is a process of charting a summary of the expenses and revenues of your SaaS. It also includes present and future revenue forecasts and important KPIs that a finance leader must keep track of.
While traditional financial models might include these elements for a single product revenue projection, SaaS financial models must factor in the complexities of recurring revenue that comes in with subscriptions, churn, and the impact it has on predicting future revenue.
SaaS businesses typically incur high costs in their early stage, when the focus is on acquiring new customers. Since the revenue is accrued over a period of time, it is critical to track customer retention and reduce customer churn for SaaS businesses.
That’s why it is critical to use financial models that are tailor-made for the nuances of the SaaS business model.
A SaaS financial model is important because:
It gives you an understanding of the financial viability of the business.
It gives you a sandbox to understand the impact certain strategies may have on your profitability, through forecasting.
It gives you a comprehensive picture of the cash flow in relation to the expenses.
It helps you keep a close tab on your unit economics