“…What do all financial models have in common…” – they are all wrong….
At the core of financial modelling is calculating future cash flows. Nobody, knows exactly what the future holds; therefore how can any model be 100% correct? If they are all wrong, are they of any use? As believers of fundamental structured corporate finance, we would like the answer to be an emphatic yes. However, how useful a model is, is highly dependent on what steps have been undertaken to reduce the potential errors in the model.
This blog is not sales pitch for financial modelling. Nor is it an avenue for outlining good modelling practises to reduce human and calculation errors. Its focus is to establish the assumptions underpinning future cash flows – improved rigour here is directly proportional to the usefulness of a financial model.
Detailed financial modelling often breaks a business operation down to its simplest components – what is being sold/delivered and for what price. It’s these future sales and customer numbers that is the focus of this post, particularly in the relation to SaaS companies.
SaaS, or Software as a Service appears to be the new exciting kid on the block, quite often speaking a completely foreign language. Who is this kid… and what is ARPU, CAC and CMR?
Here at Clare Capital we have been doing financial modelling for several New Zealand SaaS companies (both public and private), during which, we have had a bit of a crash course in the world that is SaaS and would like to pass on some of what we have learnt.
[For those that live and breathe SaaS, feel free to point out anything we misrepresent, for everyone else feel free to contact us for more information].
Congratulations to one of our clients Mindscape for winning the Innovative Hi-Tech Software Product award at the 2014 NZ Hi-Tech Awards for their product Raygun, an automatic crash & error reporting application. Furthermore, they received a Highly Commended for the Innovative Hi-Tech Software Service award.
Mindscape were also nominated for the Innovative Hi-Tech Mobile Product award at the 2014 NZ Hi-Tech Awards.
Clare Capital is very proud of your achievements so far and look forward to where the business is heading.