Enterprise SaaS Financial Model - Varying Contract Terms

 I have done a wide range of SaaS financial models. However, none of them include logic to account for customers that may be on varying contract lengths. This template has solved for that by including 'contract term' as a variable input. The accompanying logic needed to make it dynamic was difficult, but well worth the functionality.



Pricing


The template will be sent after purchase.
  • The model itself will forecast up to a 5-year period by month and by year.
  • There are up to 3 customer tiers
  • Each tier has its own assumptions for:
    • Contract length (in months)
    • Retention rate - adjustable each year
    • Total contract value for term - adjustable each year
    • % increase in contract value at renewal
    • Starting users and growth of those users
    • Ad Spend (adjustable each year)
    • Cost per Acquisition (adjustable each year)
    • % improvement in retention
The user of this financial model can adjust the average contract length of each customer tier to any number from 1 to 60.

There are a few headcount categories that are driven by ratios. They include customer support (up to two types with different fully loaded salaries) and sales reps (up to two types with different fully loaded salaries). The customer reps are calculated based on an input for the number of CS persons needed per active customer in each tier. This can be a number less than 1 i.e. 0.1 would mean a CS person can handle up to 10 customers.

For the sales reps, the ratio is based on total added customers per month.

The rest of the template is fairly similar to the rest of the builds I have done. There is a control tab to define the start year, debt and equity contributions as well as the % of the business going to investors, the exit year, and the exit value (based on a trailing 12-month revenue multiple from the exit month)

There are a lot of visuals to show the most important key metrics that are related to SaaS businesses. These include CaC (customer acquisition cost), LTV (lifetime value per customer), Month to pay back CaC, LTV to CaC ratio, and more.

The model presents itself with an Executive Summary tab to show the highest level financial line items (revenues, expenses, EBTIDA, Cash flow). Also, there is a DCF analysis for the project itself, for investors, and for owners as well as equity multiples, and total ROI. Visuals make it easy to see the cash distributions as well.

One of the important pieces of dynamic logic that exists in this includes the idea of renewals. Since contract lengths can vary, the renewal month is different for each cohort. The model allows for this to happen and has references to know when a renewal is triggered and the resulting revenue per contract / number of customers left in a cohort at any given point in time.

There is also a spot for general operating expenses that are common in an enterprise SaaS organization. I tried to put enough slots for General and Administrative, Sales and Marketing, and Research and Development to account for a wide range of company sizes. These items allow for a defined start month and a varying cost value in each year.

The churn is displayed so that if the expansion revenue ends up resulting negative churn, you will actually see the monthly churn as a negative value visually.

You can easily plug the results of this forecast into formal financial statements (Income Statement, Balance Sheet, and Cash Flow Statement) with the addition of this 3-statement financial model.