Selecting an appropriate financial model for SaaS start-ups, there are certain standards that make it a good model. For example, it should be insightful and easy to understand yet not haphazard. Your financial forecasting models should pass on the following hallmarks:
In a financial model, an assumption gives a clear idea of the company's growth as-per the current performance. Not only is it the starting point, but also an implication of the company’s upcoming financial statements. A good financial model should provide accurate, realistic, and quantitative assumptions of your SaaS business.
The model should provide equitable data that correlates with current performance and past values. It should be clear, without any irrelevant data. That's why it’s important to always check the values you are adding.
Your SaaS financial model should be error-free and precise. The formula you use should be consistent, and the numbers should be accurate. Keep values clearly visible and free from fatal errors such as intricate models, lack of data integrity protection, illogical layouts, hiding rows/columns, complex formulas, etc. Also, it should not feature hard values as it makes the formula more complex.
Your SaaS financial model should be flexible and adaptable both in the present situation as well as in the long term. A dynamic model allows users to add various values into cash-flow projections, debt services, inflation rate, and other sections. In addition, different analysts can add different data based on their unique projections. So, your model should be adjustable and manipulatable across different fields.
- Simple and Easy to Understand
A good financial model doesn't have to be complex. Rather, it should be easy to read and understand, organized using a well-structured layout. Be consistent with page breaks, color schemes, columns, fonts, and every other element you use. Please remember that consistency and formatting make even complex models simple to understand.