In many industries, financial modeling and projections are powerful tools. For SaaS companies, these processes can contribute high-value insights to your growth strategy. As these companies grow rapidly in the modern world, financial projections and modeling allow you to minimize risks, value your company and strengthen your approach to budgeting. Learn how Compass East makes this possible.
The Challenges of Financial Modeling for SaaS Companies
SaaS companies often face the majority of their lifetime costs in the development phase, and they rely on customer subscriptions to pay back the expenses, grow the revenues and start earning a profit. Financial modeling can be complex for these companies because revenue contracts can be complex, and gaining and retaining subscriptions is critical.
Customer retention and churn can be in constant flux, and your team may find it challenging to accurately project what your company’s financials will look like next year or even next quarter. With customer retention playing a key role in your business model, you also must pay close attention to acquisition costs and how they will balance with your expected customer base.
The key to financial modeling for SaaS companies is effectively bridging quality historical data with forward-looking revenue generation strategies. However, many teams lack the internal resources or expertise to spearhead this process. Working with an experienced professional is the solution.
Our Financial Projection Services
Financial projections are data-driven insights about your company’s future revenue and spending. Many companies will use financial models and projections in parallel with their financial statements to guide decision-making. When these models are derived from quality historical data from the company, they offer insightful information about the expected trajectory of your operation.
At Compass East, we use advanced tools and processes to assess your company’s historical data, analyze the company’s vision and build models based on your preferred level of detail. Some financial projections can include a few high-level categories, while others cover multiple categories from across your organization. The key data points needed for these projections are income statements, balance sheets, cash flow statements and supporting schedules.
Once we’ve compiled the information we need, we run numerous financial scenarios, including:
- Service line expansions or new product introductions
- Revenue growth strategy
- New hires
- Fundraising strategy
- Capital allocation
- Infrastructure buildouts
- New locations
Our team learns the intricacies of your SaaS business model to create financial models tailored to you. With the input from our experienced advisors, you can identify key drivers in your success, manage new expenses and grow your business.
The Benefits — How Financial Modeling Solutions Transform SaaS Companies
With Compass East leading your financial modeling, you enjoy a range of benefits that support your success in the long term. With our solutions, you can:
- Understand performance: SaaS companies often grow rapidly, but every business faces fluctuations. Connecting to your revenue and spending provides a clear picture of your company’s performance and how you can respond. Examining performance can also influence your budgeting practices and make them more effective.
- Reduce risk: Every financial decision comes with risks, but understanding your performance helps you minimize them. Your financial projections can tell you how much money you can safely spend during transitions like new services and expanded locations. You can also more effectively measure return on investment (ROI) when you gauge profit and expenses.
- Project long-term value of your business: When you want to sell a stake to outside investors or restructure your company, valuation is vital. It can also provide perspective on how your company performs in the industry at large. Through financial forecasting, Compass East determines free cash flows at different points throughout the year that relate to company value.
- Facilitate growth: Understanding financial patterns and how to use them empowers you to make decisions that drive results. Manage investments, elevate acquisition and address structural changes with confidence. Through an ongoing connection to your company’s financial performance, you can watch your business model evolve.