How important are clear and distinct revenue streams in SaaS? Well, your valuation depends on it.
The proper SaaS P&L setup helps your team, your Board, and your investors.
Quick guide. #saas
The proper SaaS P&L setup helps your team, your Board, and your investors.
Quick guide. #saas
SaaS Revenue Streams
It's no longer just subscription revenue for SaaS companies. That was SaaS pricing 1.0.
I've worked with SaaS companies that had 5 distinct revenue streams.
Have you clearly defined your revenue categories?
It's no longer just subscription revenue for SaaS companies. That was SaaS pricing 1.0.
I've worked with SaaS companies that had 5 distinct revenue streams.
Have you clearly defined your revenue categories?
Subscription Revenue
🚀Generated from invoicing subscription contracts that range from monthly to multi-year. Your product and resold products. This is contracted MRR or ARR.
☠️Careful with resold products. I may roll up to subscriptions but I code to a different GL account
🚀Generated from invoicing subscription contracts that range from monthly to multi-year. Your product and resold products. This is contracted MRR or ARR.
☠️Careful with resold products. I may roll up to subscriptions but I code to a different GL account
Variable Revenue
🚀Examples include transaction, usage, processing, consumption, etc. Variable revenue may have no minimums or may have minimums and/or pricing tiers.
I don't code this to subscriptions. You'll get caught in DD when they review your contracts.
🚀Examples include transaction, usage, processing, consumption, etc. Variable revenue may have no minimums or may have minimums and/or pricing tiers.
I don't code this to subscriptions. You'll get caught in DD when they review your contracts.
Managed Services
🚀Services contracted as a subscription that require human effort (maybe ChatGPT now!) to fulfill the contractual obligation.
You'll get more credit than one-time PS revenue so break this out. I perform retention analysis on this as well.
🚀Services contracted as a subscription that require human effort (maybe ChatGPT now!) to fulfill the contractual obligation.
You'll get more credit than one-time PS revenue so break this out. I perform retention analysis on this as well.
Professional Services
🚀Non-recurring services revenue derived from the implementation and configuration of our software and/or the onboarding and training of end users/customers.
☠️Don't forget about Rev Rec with PS revenue and the year-end cutoff with your auditors.
🚀Non-recurring services revenue derived from the implementation and configuration of our software and/or the onboarding and training of end users/customers.
☠️Don't forget about Rev Rec with PS revenue and the year-end cutoff with your auditors.
Hardware
🚀Yes, hardware is still being sold with some SaaS. Physical hardware sales that are offered with the subscription or variable revenue streams.
🚀Yes, hardware is still being sold with some SaaS. Physical hardware sales that are offered with the subscription or variable revenue streams.
Product ID/SKU Coding
The setup of your product ID's is so important. This usually dictates where your revenue posts on your SaaS P&L.
The setup of your product ID's is so important. This usually dictates where your revenue posts on your SaaS P&L.
Why Are Revenue Streams Important?
1) The character of your revenue determines your valuation (among other things!)
2) You must calculate gross profit by revenue stream. What revenue streams contribute to your profitability?
3) SaaS metrics formulas are influenced by this.
1) The character of your revenue determines your valuation (among other things!)
2) You must calculate gross profit by revenue stream. What revenue streams contribute to your profitability?
3) SaaS metrics formulas are influenced by this.
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