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:

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David Skok

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  • 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?

  • 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.

  • 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:, 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

  • 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

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

  • 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 ( 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?

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

  • Criti

    how do i estimate the market size of an industry to know whether anew product can enter or fit in? Pleas explain.

  • David, nice analysis. I would also be interested in the Excel files. I just posted a complementary article on my blog if you are interested (it includes a couple of business ideas)

  • StacyBurchard

    Great article on SaaS david! Sometimes we all need a little helping hand. I’m glad I went to Odditly (google them) before I decided to hire a random online marketing company. With their guidance, I was able to find the right company to do the right job I needed to be done. I am ROI focused of course. They opened my eyes to static online marketing plans. What works for one company may not work for yours! So do your homework everyone!

  • Mike Brown

    Hi David, first time I noticed that marketing people and sales management costs excluded from CAC. Interesting, can you elaborate on why? How do you capture inefficient people spend (or or you assuming some reasonable ratio program v. people$? Also how do you take into account sales squad costs (e.g. SDR, SE, Sales Ops, etc.)? Thank you!

  • Hi Mike, there might be some confusion here. The only time that I advocate for taking sales and marketing people costs out of CAC is when you’re in a ramping phase and have more management bandwidth on board than is really needed for the current size of organization. You can then take those managers and prorate the amount of their costs for the size of the org today versus the fully built org.
    Best, David

  • mike brown

    Hi David, makes a ton of sense, thank you.

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