SaaS Business Models – Slide Deck

I presented the following set of slides to the Mass TLC group as the keynote for the “SaaS Business Model Update — Creating and Managing Revenues” event. The slides should be useful for anyone interested in learning about the key drivers for a SaaS business, including the SaaS cash flow trough, cost of customer acquisition, churn, lifetime value of the customer, etc. The slides also looks in detail at what drives growth.

The greatest value from this slide deck will come if you download the model and try inputting your own variables. The Excel Spreadsheet and associated PowerPoint file can be downloaded by clicking here. If you store both in the same directory, the PowerPoint graphs can be updated to reflect the data in the spreadsheet by right clicking on each graph, and selecting “Edit data”.

If you have any difficulty seeing the above slides, here is the link to where they are posted on Slideshare: http://www.slideshare.net/DavidSkok.

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  • http://www.coolsimsoftware.com Paul Bemis

    Hi David,
    I agree with your conclusions completely. I had not done the analysis, but it was clear to me that we would need to keep the CAC very low (low touch) and use an “annual pre-paid” subscription model for our SaaS based business. The result has been continued steady growth with sufficient cash to grow the business organically. This would not have been possible 10 years ago, but by leveraging other SaaS solutions such as Quickbooks online, constant contact, hubspot, and gotomeeting (to name but a few) we have been able to keep the cost of customer acquisition very low, and customer retention high.

  • Martin Bittner

    Hi David,

    As usual, excellent stuff! I was wondering if you happen to have audio for this?

  • http://www.cosential.com Dan Cornish

    Hi David,

    Please video these talks if you can. This is really great stuff. I have a question.

    Let’s say a typical deal is worth $5000 ACV. And our software is so great that our customers typically last about 7 years. So the LTV is $35k. In your slide 19, the CAC of a customer like this should be <1/3 LTV so it would be <$11k. But the other point on the slide is CAC should be < 12 months revenue or $5k. I have also heard that the CAC should be no more than 6 months revenue which would be no more than $2.5k. I also get the CAC should be as low as possible. My question is what factors help you to decide to spend more? For cash flow the less the better, but for valuation of the company does spending more to gain market share increase the value of the company even though the overall profitability is lower? Thanks in advance.

  • Cameron Bahar

    Hi David,
    This is very useful, thanks for sharing.

  • http://www.forentrepreneurs.com David Skok

    Hi Dan,

    Thanks for the suggestion. It’s a great idea, so I will work to put out a video version of this deck shortly.

    Regarding your second question, my own view is that you will make your company more valuable if you are able to show good growth, so long as it is also clear that you will get to good profitability at some future point. Wall Street clearly demonstrates that they will pay a big premium for fast growth, and that they are willing to wait for profitability. (However I am sure there are folks who will disagree with this.)

    There is another very big reason why I believe you need to grow fast: becoming the clear market leader. The tech world tends to have a winner-takes-all phenomenon (search: Google, social networks: Facebook; CRM: Salesforce.com, etc.). The financial markets pay a lot more for the market leader. And further more there are huge marketing benefits to being the market leader that are self-reinforcing: the press, bloggers, analysts, etc. all write more about the market leader, customers tend to like to buy from the market leader, and make faster purchasing decisions as they view it as safe when there is a clear market leader, etc.

    The important caveat to the above is the kind of growth that I am recommending should only be pursued when you are really sure that you have a repeatable, scalable sales model. Going for growth before that is highly risky, and usually leads to expensive mistakes. I wrote about that in my previous blog post on How to set the startup accelerator pedal.

    Best, David

  • http://www.forentrepreneurs.com David Skok

    Martin, thanks for the positive feedback. Appreciated! I don’t yet have the audio for this, but do plan to do a version with audio shortly.
    Best, David

  • http://www.forentrepreneurs.com David Skok

    Paul, nice to hear from you again. Great to hear that CoolSim is doing well. Congratulations.

  • http://www.posao123.com/ Posao 123

    this is great!

  • RoyDemayo

    Hi David, excellent presentation. can you also share the excel file/s you used for those nice looking graphs. I really appreciate to see the actual numbers.

  • Boro K

    Excellent and superb presentation. It help me a lot to know about SaaS business model.

  • Brian Curliss

    Hey David! Can I get your feedback on the SaaS Business Model Canvas (http://www.saascanvas.com)? There seems to be overlap and I’d love your thoughts. The drivers and metrics are similar, but different enough to be intriguing.

  • Krishna R

    Nice i also know one SaaS based company in pune that is SaaS-Tenant

  • Angela

    Hi David, This is great, can you please explain the concept of cumulative billing?
    Angela

  • http://www.forentrepreneurs.com David Skok

    That simply refers to the total amount that you have billed since you started working with a customer.