Strategic Finance (Tech/SaaS)

Cash position is top-of-mind for many early-stage SaaS companies, especially for companies that have not yet achieved profitability. The good news is we are here to help. Our process for forecasting and managing cash position has become a science. We start by creating a detailed forecast of revenue and expenses by line item and month over a future period (usually three years). Leveraging in-house tools and best practices, we create a budget model that is completely customized to capture the unique aspects of the client’s business.

Once the budget model has been created and validated, we establish a “dynamic budgeting” process for the client. This involves sensitizing key variables to create multiple budget scenarios (usually 4 or 5), each representing a progressively more aggressive capital-raising assumption (e.g., Low Scenario, Base Case Scenario, High Scenario, etc.). Each scenario reflects a different set of business activities and staffing, and the capital raising assumption in each scenario is sized to provide a predetermined amount of cash runway (usually 18 to 48 months for early-stage SaaS companies). We refer to the capital raising assumption for each scenario as a separate and distinct "milestone target."

After the budget scenarios and milestone targets are established, the client operates under the budget scenario reflecting the highest capital-raising milestone. Once a higher capital raising milestone is completed, the client transitions to operating under the new applicable budget scenario. This process ensures that the client's capital budget and allocation strategy are always "right-sized" relative to their liquidity position. Moreover, this approach guarantees that corporate initiatives and expansion activities are “match-timed” with the raising of sufficient capital to fund those efforts.

The process described above establishes where the company wants to go; the next step is to create a detailed roadmap of how to get there. To that end, we have developed a robust suite of tech-specific services and tools to assist our clients in operationalizing their targets, identifying opportunities, and tracking performance. A partial list of these capabilities is provided below:

Dashboard/OKR creation leveraging the metrics, methodologies, and benchmarks used by top tech-specific venture capital firms (e.g., specific accounting conventions for calculating gross profit margins and applying the rule of 40, magic number, CAC per customer, headcount efficiency, etc.)
Calculation and forecasting of customer lifetime value (cLTV) using state-of-the-art tools and methodologies
Cohort analysis (logo retention & NRR)
Customer journey data analysis to assess the performance of individual ad/channel campaigns and inform modifications to marketing and advertising strategies
Evaluation of financing options and loan agreement review
Data room set-up and due diligence collection/tracking