SaaS business/revenue model Excel spreadsheet

As the software industry morphs towards an industry where a SaaS offering is the norm many have difficulty when it comes to setting subscription pricing and understanding the new revenue model on which their future may depend. 

Unlike the traditional licence model where one receives a large upfront licence fee and ongoing maintenance fees of the order of 20% of the licence fee each year, the SaaS model poses price/subscription setting challenges and the cashflow impact of getting it wrong can be fatal..

When one looks at a SaaS revenue model there are four key interdependent variables.  These are:

·         The number of paying customers for the SaaS service

·         The average number of paying users/subscribers per customer

·         The average subscription value per paying user/subscriber

·         The annual attrition rate of paying users/subscribers

 To come up with a SaaS strategy it is essential to mix and match these variables to come up with the optimum mix.  The optimum mix is the one that helps you achieve the organisation’s strategy which may relate to maximising revenue or maximising market share.  If we take an example of an organisation that has 100 customers, each with an average of 20 user/subscribers paying an average subscription of $20 per month we can look at the revenue impact of two alternative scenarios.  

·         Strategy 1. A focus almost exclusively on signing up new customers, i.e. growth in number of customers 40% per year, no growth in the average number of users or subscription rate and an attrition rate of 20%,

·         Strategy 2. A more balanced strategy which focuses on growing the number of users per customer and the average subscription rate and keeping attrition to a low level, i.e. growth in number of customers 15% per year, 10% growth in both the average number of users and subscription rate and an attrition rate of 5%.

Strategy 2 delivers 26% more revenue over a three-year period.

The Business Tools Store Excel SaaS Revenue Model/Calculator allows “what-if” analysis and the revenue implications of different strategy options can be readily assessed.

The revenue model/calculator is suitable for both existing SaaS businesses and new SaaS businesses.

A dashboard summary of the results for three years is produced.

The Excel template is totally customizable and uses only standard Excel features.

Tto download a copy go to%%GLOBAL_ShopPath%%/subscription-revenue-model-calculator-saas-pricing-software-business-model/.