How to Model SaaS Projections for Interviews
Hey WSO - this post is specifically for those of you in IB / Consulting who are interested in breaking into Software Buyout, Growth Buyout, Growth Equity, or Late Stage VC.
Now that I'm in the industry, I want to help you guys understand how to actually model out SaaS LBOs, based on Customer Cube data. There was so little information on this when I was recruiting and I had to piece together bits of wisdom from a wide range of posts to figure this out. It's a lot easier to wrap your head around when you can reference an actual example.
To pay it forward, I've put together a basic model that maps out Beg ARR, New Logo ARR, Upsell ARR, Downsell ARR, Churn ARR, and Ending ARR -- based on raw customer revenue data. You can see how this is all projected based on an assumed S&M spend, which is applied to an assumed CAC to get # of new Logos, which is multiplied against ACV to get your New Logo ARR in order to build out your ARR projection. From there, you can see how beg and ending ARR balances can be averaged out as a % of actual historical Revenue. After that - it's fairly standard % cost margins against revenue (except for S&M spend).
Note that this is just 1 basic way to model this out. However, this should be sufficient to land a software buyout associate role. You can use this as a start and build additional complexity in the model based on what you want to solve for (headcount planning, S&M driven by # Reps, New logos driven by Rep Attainment, etc).
Comment below and I'll send you a link to the model in Google Sheets.
UPDATE: Due to high demand, I've removed the raw data and shared a simplified ARR -> Revenue Projection build in the link below. You can use this as the foundation to build your LBO model & add complexity. I should emphasize that you should understand the underlying assumptions for sales efficiency (Product Led Growth vs Enterprise Sales motion) - some thoughtful comments below I’d encourage yall to read through.
Link Here: https://docs.google.com/spreadsheets/d/1Q2dTXc0u7…
Thanks so much, could I have a link please?
Interested but posting here for visibility: OP won't be able to send 35 DMs due to WSO limitations. Literally just post the link here.
replied in original post above ^
Thank you! Can you please send me a link?
Thanks for sharing! Here for the knowledge.
Thanks so much, could I have the link please?
Interested, thanks!
Please could you send me the file?
Could I please get it too?
-
Thank you so much, can you please send me the link?
Thanks for taking the time, could you send link?
I’d love a link as well please!
Could you send link please thanks!
Appreciate you putting this together!
Link please!
Could you send to me as well? Thanks
Can you please provide?
interested, thanks!
thanks for this, would be interested in a link!
Would appreciate the link, thank you!!
Would love the link! Thanks for the help!
Interested
interested, thank you!
Thank you so much! I’d love to have a link
Thanks so much, could I have a link please?
Would appreciate it as well! Thank you for sharing.
Would really appreciate the link! Thank you.
Would love to see!
Could you share with me as well?
Thank you for this! Can I have the link please?
Would appreciate this a ton! Could you please send this to me? Thank you.
Thank you! Could you please send me a link?
Thank you so much for doing this! Commenting for the model
Thanks so much! Commenting for the model :)
Thank you for taking the time to build this out! Would love to get access if possible
Thank you, appreciate it! Could I please get the model?
Commenting for the model!
Could you please also share the link? Thank you!
Could you share thanks!
Thank you so much! Could you please send the link?
Would appreciate the link. Thanks
Pls send link. TY!
Interested, thanks!
Interested, thanks!
Would appreciate the link-- cheers!
Out of an interest in giving back as well I might add some color since I am a software buyouts guy. When you look at something like S&M you should really think about what the cost is there. And for classic enterprise software (not PLG software) the cost is reps. And so another way to think about this is if you assume a certain path of rep productivity (ramp over 18 months) you can actually start with the number of reps you want to add (so part of S&M is a function of that) and then say OK we have capacity to bring on xyz amount of capital, what kind of return can we make on that given a certain rep productivity path. And then you also want to model out CAC, and say ok is this going to be the same, or is this a consumer internet business and CAC is going to quadruple in four years?
How do you think about CAC growth ? Ie if your CAC quadruples, do you assume your sales rep productivity is divided by 4?
How do you think about sales vs. Marketing in that regard ?
you are mixing up PLG and SLG, in the former the company spends money into CAC, with less support of sales reps. In SLG, this is mainly driven by sales reps. So I dont think you can just divide sales rep productivity by four.
Speaking of only B2B SaaS businesses we typically just think of it as a sales efficiency multiple (new+cross sell+upsell(excl. price if possible))/S&M
Having previously invested in and worked at a SaaS business as well as evaluated candidate case studies, happy to share some thoughts. The model shared is definitely very high level and correctly touches on the components that lead to revenue projections. However in terms of interviewing and possibly doing a case study/model test, there needs to be more concrete thoughts on how you're arriving to your ARR and revenue figures – a few examples would be whether the business is Enterprise or PLG driven (this would impact how you think about S&M in terms of seller productivity vs TOFU marketing spend and CAC), what SKUs/plans are offered and what does retention look like (which implies having a cohort waterfall built).
To convert ARR to revenue, you just apply a %?
How about non-recurring (ie service) revenue ?
Yes, for the purposes of this. If you have services revenue, then its just an attach rate on Software revenue to get Services revenue. If you need a more complex model, then you can do bookings revenue (software) that gets recognized over time and have your services/implementation fee alongside new bookings.
How would the more detailed way from ARR to Revenue look?
could you also upload the more complex version with the underlying data + ARR to revenue mechanics? thank you
.
link doesnt seem to work?
.
does this link work for people?
This is a really useful resource for those interested in the aspects of LBO SaaS. I think that many will be grateful for your initiative and willingness to share knowledge. I will definitely study your model and perhaps even use it for my research and analysis. Good luck and thanks again!
Hey super helpful! Do you mind explaining why revenue is projected as a % * last two quarters / 4? Trying to understand the intuition
Could you share the underlying customer data in a separate link?
At what point do you think it is worth it to model with a monthly cohort analysis in mind?
In my experience, the simple model probably gets you pretty close when you are scoping but the data analytics and demographics that can be gleaned from monthly cohorts is pretty compelling to use.
interested thanks
Stumbled across this old thread while looking for LBO templates. Brings back memories of how painful it was to figure out these metrics from scratch. Having a clear ARR projection framework is a lifesaver. I managed to simplify my own workflow later by using MyOutreach for client data; it kept everything organized so I could focus on the modeling instead of just tracking numbers.
Have a few SaaS models, feel free to pm
Could you PM me? For some reason I’m not able to message you, but I’d definitely be interested in the SaaS models. Thanks!
This is a great resource to have on hand. Breaking down the ARR projections based on sales efficiency is a smart way to approach it.
Modeling SaaS LBOs can get complicated quickly, so having a base framework to start from is incredibly helpful for those trying to get into the space.
Appreciate you sharing this model. Understanding the differences between Product Led Growth and Enterprise Sales assumptions is definitely key when building these out.
Can anyone share a version with the raw customer data?
Have a databook example, feel free to dm
Just dm’ed
Illum possimus beatae qui sint accusamus reiciendis hic. Nihil sequi aliquam magnam sed omnis. Impedit quidem dolorum consequatur consequatur. Vero omnis id sapiente natus sed quo voluptatem. Doloribus excepturi corporis sit atque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ratione velit earum voluptas dignissimos dignissimos beatae culpa eaque. Sed officiis nobis eligendi quidem sit fugiat et. Reprehenderit placeat nihil deleniti fugiat commodi vel.
Aut dolores dignissimos autem nesciunt iusto id. Minus excepturi sint rerum provident enim excepturi. Ut sunt iure quidem sit rerum officia voluptatem. Quo qui et alias accusantium. Hic minus rerum vitae itaque rerum at.
Quaerat quos laboriosam amet nostrum non et. Nihil provident voluptatem rerum. Enim consequatur sunt animi rerum voluptas ad. In unde ipsum mollitia rerum dicta. Ullam sapiente quaerat vitae esse in perspiciatis. Odit aut eaque aut est.
Quod dolor fuga facere fugiat temporibus. A ut nobis cupiditate. Eos consequuntur temporibus inventore sunt totam ducimus est.
Molestiae et occaecati temporibus. Nemo est non quasi dolorum natus corporis sed. Quibusdam rerum sed consectetur debitis odit dolores reprehenderit. Alias et autem qui et ut. Nam velit nesciunt et eos iure cupiditate illo.
In reiciendis itaque voluptatum distinctio. Occaecati fugiat modi consequatur accusamus. Vel ut error et veritatis. Ratione quos animi tempora vero possimus quam. Tempore enim eligendi ut dolorem sed delectus.
Dolor corporis consequuntur maiores qui et dolorum et. Eos repellat quia sed voluptatem nisi vel. Est ut rem modi corrupti eos. Quis perspiciatis voluptas corrupti praesentium ipsam cum laborum. Repudiandae dolores eligendi sed id aliquam dolores. Nihil quasi necessitatibus est exercitationem occaecati.
Consequatur quia est eos non totam assumenda et. Vel consequatur id iusto consectetur voluptas recusandae. Consequuntur ipsa ea inventore nemo exercitationem fugiat ab. Aut minima laborum quos ab earum.
Aut quas et sed et laboriosam. Est incidunt non accusamus eligendi minima.
Eum cumque consequatur similique porro et quaerat nesciunt. Et vel nobis est libero accusamus. Sint quis nemo recusandae esse aut.
Nesciunt omnis vitae doloribus dolorem. Magnam omnis dicta voluptatem voluptatem. Ducimus sit et inventore perferendis sit suscipit.
Rerum repellat nihil error ut quod eius. Possimus voluptatibus minus deserunt voluptate et ratione mollitia. Aut saepe ipsum tempore sed inventore totam maiores voluptatem. Omnis sit error nisi unde assumenda dolores nihil. Adipisci sint exercitationem qui.