Average Cost of Service Excel Model Template
Originally published: 19/02/2018 15:50
Publication number: ELQ-77523-1
View all versions & Certificate

Average Cost of Service Excel Model Template

Economies of Scale and Average Cost of Service (ACS) model to increase understanding of organizational cost structure.

Average Cost of Service (ACS)
ACS is an important SaaS metric for finance used to educate and to track. When it is used in isolation, we don't learn much from it. However when it is used in combination with customer acquisition costs and annual recurring revenue to name a couple, it can be really powerful. It is able to help you in answering questions regarding the effectiveness of pricing, payback, and margins.

What is Average Cost of Service (ACS)?
Similarly to many SaaS metrics, there aren't any set standards or definitions. Your company could have a different department structure or business model that is going to determine how you work out ACS and ensure that it is relevant to your business model.

ACS is calculated using these components:

R&D Amortization –
the cost (economic) of your release(s) currently
Technical Support –
in a typical case, the call centre you use that handles customer questions coming to you
R&D Net of Cap –
expenses in development cost centre are examined excluding software capitalization. What is left is the software maintenance cost and supporting current releases, not considering new development.
Account Management –
the sales team that is in charge of looking after current clients
Hosting –
your data centre and hosting costs
Customer Success –
this could be seen as in your service dpt and so counted in service margins, or as an ACS expense.

These expenses are summed up annually and divided by customer count to calculate ACS.

Average Cost of Service SaaS

Economies of Scale

Once you have calculated ACS, you are able to run scenarios that determine how your unit and variable costs are going to change once you have added more clients to your cost structure.

If you add 100 customers will it significantly drive down your unit costs? Or is it going to take 1000 clients? Working out economies of scale helps to answer questions like these and educate the management team about the company cost structure and the effect of customer growth on unit costs.

Your customer growth could be great but your cost structure could be so bloated that unit costs aren't getting better like you assumed they would, i.e. they are not sensitive to changes in customer count. This model aids understanding of the balance between customer counts and cost structure.

This Best Practice includes
1 Average Cost of Service Excel Model Template

Ben Murray offers you this Best Practice for free!

download for free

Add to bookmarks




More Best Practices from Ben Murray

See all

Discussion feed for Average Cost Of Service Excel Model Template

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

    I am failing to download this tool. Can you please send it on email azmaija@gmail.com

    I have tied following the process but once i reach my cart it only appears as images
    1arrow_drop_uparrow_drop_downReply reply
    • Manager Timothée Demoures
      Hi Aziz, To continue from your cart, you have to click on "Proceed" or "Add to Library", that will take you to https://www.eloquens.com/account/products from which you will be able to download the files if you click on the blue links (Title of Product)
      Let us know if you have any more issues.
      Hope this helps!
      The Eloquens Team
      arrow_drop_uparrow_drop_downReply reply

    4.1 / 5 (8 votes)

    please wait...