The Financing section just got an upgrade for anyone considering alternatives to venture capital. Lighter Capital joins the list of supported structures, alongside indie.vc, Earnest Capital, and TinySeed.
Lighter Capital modeling is available in all free and paid plans.
NOTE: This structure and the output have not (yet) been reviewed by Lighter Capital. However, the terms have been implemented after a careful reading of their site and terms, and is based on samples of their structure provided by founders that have considered or are currently considering investment from the financier. If you have familiarity with Lighter Capital and would like to recommend changes or improvements, we'd love to hear from you via twitter, or email at firstname.lastname@example.org.
The earlier version of the model used a rough estimate of $500/mo. per employee to estimate spend on external SaaS tools and vendors.
While better to estimate high than low, this needed refinement. Thankfully, the folks over at Blissfully publish an annual report that provides average cost of SaaS per employee annually, organized by company size!
Which means your forecasts now contain a more accurate "Vendor" expenses bucket (the orange portion of the stacked bar chart here):
This expense forecasting improvement applies to all forecasts at all subscription levels, free and paid.
I get asked pretty frequently about churn rates being available as an input to the modeling that happens underneath the SimSaaS hood.
The truth is, although it's easy to multiply last month's revenue by a fraction to get a new MRR number, gross churn is a terrible way to forecast the growth of a SaaS business, which lives and dies by the survival of its subscriptions. And what dictates survival? Product stickiness, aka "long-term cohort survival rates."
To illustrate this point, consider the following two lives of the same SaaS company.
In both cases, we will assume fairly normal 8% churn MoM of monthly subscriber. Both are enjoying good growth for now (although the weaker one doesn't know he's living in the worse universe), thanks to a referral program that's generating 4 new leads per signup. Awesome!
But what happens when each has a different percentage of subscribers cancel or stay with the service long-term?
First, the weakest case -- everyone cancels eventually. This is a common situation with SaaS products with weak fit. As soon as acquisition slows, revenue will flatten and ultimately decline. The product simply isn't mission critical, or is easy to replace with a competitor.
Before you think this is terrible ... keep in mind that the longest-lived customers will still subscribe for almost 4 years!
And here's the revenue:
Looks okay at $59k average MRR. Right?
But what would happen if we figured out a way to create a moat around our business, such that canceling is inconceivable for 75% of our customers? The kind of product that people plan to buy and keep as long as it's sold. The kind where switching to a competitor isn't easy, or perhaps just not worth it?
Revenue on the same time horizon nearly doubles to $116k average MRR!
Maybe 75% feels unrealistic, too ambitious for your product strategy. Let's lower it to 35%. Roughly 1 out of 3 of your paying customers absolutely loving your product for the price they pay. Revenue becomes this:
Thanks for learning more about the stickiness feature. The ability to select a long-term retention rate is available through our Advanced plans. You can find the slider under "Product."
"Like the CEO, CFOs have a company-wide view on the business. They operate in the middle of all the data flows in and around the business. A good CFO uses this vantage point to make a good company great, leading a high quality finance organization that manages critical responsibilities for the company. They do this by informing important strategic and operational decisions; finding new insights to improve business performance; and ideally being a consigliere to the CEO." --Jeff Jordan, a16z (link)
Analytics on future revenue and expenses are interesting, but recommendations on what to about those numbers are the real value of a CFO function. As part of our free offering, SimSaaS has started generating its first set of insights: a Health Check around runway, Solutions to navigate risks, Experiments to try, and ways to Sharpen your skills.
The Solutions section includes a mixture of targeted recommendations, relevant bits of financial planning wisdom, and direct links to solution providers that may be a strong fit for your business.
Insights are live for all accounts, free and paid. We're excited to evolve this from its current v1 status into a valuable co-pilot for early-stage founders.
When forecasting gets 100x faster, new opportunities emerge. One of those is spending more time reflecting on trade-offs and strategy. Another is having the ability to examine the consistency and accuracy of our forecasts over time.
The Forecast Vault is the last feature to be included in the public beta (coming soon!). As an archive of all previous forecasts, it provides a reviewable history of changes to your forecast and your growth model over time.
The vault provides a proof of increasing predictability. In the early days, this may simply indicate the business has settled on a price range, revenue target, or initial team size. Latter, it can demonstrate a lock on your go-to-market model.
It also provides the first clue at increased opportunity. A sudden uptick in forecasts revenue, cash, or runway can signal that an optimistic scenario has come to fruition.
The inverse is also true. A dip or downward shift in the forecast can mean that expectations have been adjusted towards numbers now considered more realistic.
Forecasts can be redacted from the vault but they can't be edited. As such, it provides an unbiased audit trail of how a founding team has been thinking about their business, a powerful demonstration for current team members, investors, and future prospects.
The Forecast Vault is available to annual subscribers to our Advanced and Expert tiers. Not ready? No worries. Your free SimSaaS account will automatically archive your forecasts into your vault so you can access them later.
As founders, we're always wondering "What if?" What if we changed pricing, went after a new market, launched that new product? What if we shortened our sales cycles? What if ... ?
With Scenario Planning -- available on our Advanced and Expert plans, you can now clone/copy your primary growth model to generate new forecasts based on completely different assumptions.
The number of questions you can use this to answer is nearly endless. But, for example, do you wonder what it would mean to your revenues if your long-term subscriber retention rate was 10% higher? What would it mean for your support overhead if you added 300 new customers through that partnership you're considering?
With Scenario Planning, for SimSaaS customers these insights are only a few clicks away!