Money, Pricing & Model

How do I build a simple financial model or revenue projection?

A starting point

Build bottom-up from real drivers, leads, conversion rate, price, churn, not top-down from 'we'll grab 1% of a huge market.' A useful early model fits on one spreadsheet and lets you flex three or four assumptions to see runway impact. The goal isn't accuracy; it's understanding which levers actually move the business.

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SaaS Metrics 2.0, Detailed Definitions

From forentrepreneurs.com by David Skok long-form reference

Why we picked it

David Skok's For Entrepreneurs work is the foundational, near-universally cited source on SaaS unit economics and modeling. It's where the LTV:CAC and CAC-payback conventions were popularized.

  • Unit economics (LTV:CAC and months to recover CAC) reveal long-term profitability
  • Simple LTV formulas break when revenue expands over a customer's lifetime
  • Build financial models from real drivers, not top-down market-share guesses
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The SaaS Metrics That Matter

From sacks.substack.com by David Sacks essay

Why we picked it

David Sacks (PayPal, Yammer, Craft Ventures) distills the metrics that actually predict a SaaS company's health, including the burn multiple he popularized. Sharp, operator-grade, and opinionated.

  • Net revenue retention and the burn multiple reveal true capital efficiency
  • Focus on a small set of metrics reviewed on a strict weekly cadence
  • Growth and profitability must be balanced (the Rule of 40)
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Why Do Investors Care So Much About LTV:CAC?

From a16z.com by Andreessen Horowitz (a16z) article

Why we picked it

A focused a16z piece on the single ratio that most captures a business's efficiency and drives its valuation. Great for founders who need to understand the 3:1 benchmark and its limits.

  • 3x LTV:CAC is a common rule-of-thumb benchmark for healthy unit economics
  • Higher LTV:CAC drives higher margins and therefore higher valuation
  • The ratio can mislead, CAC payback period matters just as much for cash
Open a16z.com →

People also ask

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