PaaS - Product as a Service: 5-Year Financial Model

This is one of the more important excel templates I have been looking to build for a while now and I am really happy with the way it turned out. PaaS, or product-as-a-service, just means you sell a product (such as an elliptical machine) and you attach a paid subscription service to it (such as a subscription to fitness trainers that comes into the screen of your elliptical).

After purchase, you will have access to the template and I will manually e-mail it to your purchasing paypal address.

This kind of business model is gaining a lot of traction and you see it in places like Microsoft's xbox gaming console where they sell console units as well as a paid subscription service for online play. It is because everyone is on the cloud and you can basically attach a service to all kinds of products that you couldn't really do before.

I have built a template to test all kinds of strategies and apply the dynamics of PaaS to a financial forecast. You can play with all the assumptions that have to do with building the product (manufacturing) and all the assumptions for on-boarding subscribers to a subscription service based on some % of the product sales also buying the subscription service.

You can test up to 3 pricing tiers and see what kinds of prices allow you to break even and grow a vibrant subscriber pool.

There are assumptions for equity and debt as well as part of that equity coming from investors and part from owners or all one or the other. All the logic and resulting distributions / IRR calculations auto-fill based on the results of your revenue and cost assumptions.

I have put monthly and annual details so you see the granular results and then rolled that up into more user-friendly high-level executive summaries that focus in on the most important line items.

There are also plenty of visuals that describe the story of your assumptions.

One of the most important metrics in a subscription service model is the CaC and LTV. All of that has been included in this. I also put in the LTV to CaC ratio and months to pay back CaC.

On the more boring front, I have built a completely dynamic cost assumption schedule. You have your main sales and marketing/research and development / general and administrative as well as a few cost of goods sold categories with their own fixed and variable drivers. There is also a section for capital expenditures (capex) and one-time startup costs.

One thing I also wanted to point out was that based on a defined amount of units produced per year, you can define the % of those units that actually get sold and the % of those sales that happen in each month. This allows you to account for seasonality. I have put a line for that for each year to maximize the dynamic nature of that piece of logic.