L/S SaaS Modeling
Learning how to do SaaS modeling but real confused over here with the RPO, cRPO, billings nonsense.
Can anyone in a SM talk about how you model SaaS names? Do you waterfall stuff? How do you incorporate RPO information into it?
Any good resource, free / paid, I can read to understand wth is going on when revenue is the least important metric apparently?
take a look at TheSaasCFO. seems like a solid place to learn and understand everything about saas business models. hope it can help you
www. thesaascfo .com/
I’ve covered the sector for 10 yrs on SS. poster above saying revenue is best metric doesn’t know what they are talking about. The holy grail metric is net new ACV and net new ACV essentially is net new ARR. sub revs x 4 doesn’t equal ARR either so don’t do that.
billings, cRPO and RPO are all key metrics but it differs from company to company. 12 month crpo disclosures you should look at Crpo bookings and billings. If company does 3-5 year deals total RPO bookings might be best metric. For companies where timing of invoice jumps around RPO is better vs billings. Every metric has its flaw and it ultimately depends on company. Happy to help more .
Bookings = this quarter’s revenue + QoQ change in RPOs
Billings = this quarter’s revenue + QoQ change in deferred revenue
Think of it:
Rep makes a sale: 5yr deal for a saas (not on prem) product
1 quarter is booked for revenue
4 quarters are billed for (assuming annual billings)
16 quarters go into RPO
So as you progress to year 2, four quarters are pulled out of the 16 quarter jar and you bill for them then recognize as each quarter passes.
So the RPO jar fills up based on your reps driving bookings. But those bookings don’t necessarily mean cash is collected (billings) or revenue is recognized until the service is delivered.