SaaS: Security Monitoring Service Startup Financial Model
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SaaS: Security Monitoring Service Startup Financial Model

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Video Tutorial:


One thing not many people think about when they hear the term ‘SaaS’ or ‘software-as-a-service’ is security monitoring. However, it encompasses all the major dynamics that are seen within a regular recurring revenue software business. You install monitoring equipment and then users pay a monthly fee. It is actually close to product-as-a-service except the user doesn’t have an option of not paying the fee. If they have the equipment, they need to have a monitoring service.


In this 5-year financial model, the user can define assumptions around how many installations are performed and differing pricing tiers as well as costs that go into the operations of a security system services company.


The model is driven based on locations added per month over time. Each of the three location types are defined by:

  • monthly price

  • percentage of new locations that fall into each tier

  • churn rate

  • equipment installation costs / margins per tier

  • Upsells and downsells in-between tiers (potential for negative churn)

Also, service calls are a final source of revenue.


The costs of providing the monitoring service is defined per tier and operational expenses are defined per start month, starting monthly cost, and percentage increase per year of these costs. There is logic for credit card fees based on the percentage of customers that pay with a credit card vs. electronic bank transfers.


Final outputs include visualizations that have advanced metrics, including the potential for negative churn, CaC, and customer LTV. Also, a monthly and annual pro forma are displayed as well as an annual DCF Analysis on a project level as well as investor / owner cash contributions / distributions, IRR, and ROI, and equity multiple.

 

Video Tutorial:


One thing not many people think about when they hear the term ‘SaaS’ or ‘software-as-a-service’ is security monitoring. However, it encompasses all the major dynamics that are seen within a regular recurring revenue software business. You install monitoring equipment and then users pay a monthly fee. It is actually close to product-as-a-service except the user doesn’t have an option of not paying the fee. If they have the equipment, they need to have a monitoring service.


In this 5-year financial model, the user can define assumptions around how many installations are performed and differing pricing tiers as well as costs that go into the operations of a security system services company.


The model is driven based on locations added per month over time. Each of the three location types are defined by:

  • monthly price

  • percentage of new locations that fall into each tier

  • churn rate

  • equipment installation costs / margins per tier

  • Upsells and downsells in-between tiers (potential for negative churn)

Also, service calls are a final source of revenue.


The costs of providing the monitoring service is defined per tier and operational expenses are defined per start month, starting monthly cost, and percentage increase per year of these costs. There is logic for credit card fees based on the percentage of customers that pay with a credit card vs. electronic bank transfers.


Final outputs include visualizations that have advanced metrics, including the potential for negative churn, CaC, and customer LTV. Also, a monthly and annual pro forma are displayed as well as an annual DCF Analysis on a project level as well as investor / owner cash contributions / distributions, IRR, and ROI, and equity multiple.

 

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