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Any SaaS operator will be asking their finance team, revenue director, or CFO what to price the product at. There is a lot of nuance and a lot of factors that go into informing a subscription price. This model will help.
This is a general use SaaS analysis tool that has enough configurable inputs to fit regular month-to-month SaaS business or enterprise SaaS organizations. This can handle any term lengths for customers as well.
It is very good at showing gross profit per customer over time as well as total customer lifetime cash flows. The purpose is to configure up to 10 ideal customers based on inputs like Contract value, contract retention, average value per contract, contract length (months), customer acquisition cost, improvement on contract value at renewal, on-going service costs, one time setup fees and costs in order to show valuable metrics about an ideal customer.
This tool is great for sensitivity analysis as well if you want to isolate one of the above variables and keep all the rest the same and see what that does to customer lifetime value, CaC payback, LTV to CaC ratio, and IRR.
Yes, IRR was built into this (monthly and annual) and this can be done because each customer can be distilled down to net cost to acquire and future cash flows per the retention / contract period.
Based on this, you can simply run an IRR calc. And that becomes a good metric to compare various customer configurations by. Initial acquisition costs and on-going costs to service each contracted are broken down into more bottom-up assumptions for more accurate calculations.
For example, you can define things like ad spend in period, sales and marketing spend in period, and measure that against expected customers added in period to get the CaC. Awesome visuals will show the final key metric outputs per customer type (up to 10). Video Instructions included (link in file)
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Source: Best Practices in Integrated Financial Model, SaaS Excel: SaaS Customer Pricing Simulator: Optimization Template Excel (XLSX) Spreadsheet, Jason Varner | SmartHelping
ABOUT THE AUTHOR: JASON VARNER | SMARTHELPING
I graduated in 2011 with a Bachelors degree in Accounting. From there, I worked at a few small businesses doing financial reporting and some bookkeeping. After a few years of that, I started doing freelance financial consulting work on Elance and Upwork.
After over 400 jobs completed with a 100% success rate, I now run my own modeling/consulting practice and continue to build new financial models every few weeks. [read more]
I occasionally take on custom financial modeling work.
Jason Varner | SmartHelping has published 123 additional documents on Flevy.
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