In this modern era, more and more activities are getting digital. With all these innovations, there’s no wonder almost everything that we do and use is paid monthly. While more press has been given to Software as a Service (SaaS) industries, these subscriptions are just around the corner, from music and movies, don’t be surprised that later our basic needs will also come in a monthly subscription. This article will attempt to elaborate forecasting template for SaaS business.
Defining SaaS Terminologies to build Subscription Forecast Before you were able to forecast revenue and customer growth, you should initially understand these definitions.
Calculating Revenue from Subscription Services
Building a Forecast Since you already have the basic knowledge of terminologies is SaaS industry, we will now build a sales forecasting template for a monthly subscription. Here is how it should look like. This model is quite simple and assumes that it operates in a simple monthly subscription without any one time set up fees. Based on this model, you can adjust your ARPU level; some customers might upgrade for a high-priced subscription offered. Feel free to play with the figures to fit your terms. Conclusion: Forecasting Template allows you to predict your desired revenue In general, forecasting allows businesses to predict their target revenue or profit, thus making an effort to achieve what has been forecasted. Though it may be changed or altered depending on the situations, this drives the company to meet and exceed this forecast, which can be beneficial to the company and its workers.
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Valuing a property is the necessary foundation before investing or buying a particular real estate. Some other reasons for real estate valuation are taxation, property insurance, and property listing. You must first establish the property cost before making related financial decisions.
There are different categories of real estate properties, such as residential, commercial, and industrial properties. Depending on your purpose and the kind of property you are evaluating, you can use various real estate valuation methods. Let’s discuss some of them below. 1. Replacement Value Replacement Value is the cost needed to buy the land and construct the property from scratch. It is a suitable valuation method when you want to buy an existing property. It can help you assess how much is the maximum price you can pay for that property. If it is higher than your Replacement value, you might be better off building the property. Other considerations are the state of an existing property, how much it will cost to improve, and the average estimated useful life. 2. Sales Comparison Sales Comparison uses current marketed comparable property and utilizes its multiples and ratios to compute evaluated real estate value in the same target area. This value reflects how much the market is willing to pay for the same property. If data for comparable is available, Sales Comparison helps assess the market value of the real estate. However, be cautious in using this method and make some cost adjustments since some factors are not precisely the same between the two properties. 3. Capitalized Earnings Another valuable method for real estate valuation is Capitalized Earnings. It is computed by dividing the Rental Income over the Gross Capitalization (Cap) Rate or Net Capitalization Rate. The Net Cap Rate considers the Operating Costs while the Gross Cap Rate does not. Since data or operating costs are not widely available, the Gross Cap Rate is widely used. Cap Rate represents the expected return of the real estate industry. 4. DCF Analysis DCF Analysis is more comprehensive and required significant assumptions in assessing property valuation. It considers the future cash flows generated, discount rate, and the time value of money. Future cash flows are discounted to their net present value using the discount rate, commonly WACC (Weighted Average Cost of Capital). DCF analysis requires more in-depth analysis compared to other valuation methods. Still, investors and analysts prefer to use it for investment analysis and project evaluation since DCF analysis provides the projected free cash flows in today’s money, to be generated in a given period. It is advantageous to use two or even more real estate valuation methods to give you a comprehensive assessment of the property and a different perspective. Real estate valuation methods must be done before investing your hard-earned money into a particular real estate. Financial ratios used figures in the financial statement to interpret the data and have an in-depth analysis of business performance. Owners, investors, bankers, analysts, and other stakeholders used financial analysis to guide business decisions such as investment, capital expenditure, and funding sources.
To give an overview of the different types of financial ratios and easy reference, below are the financial ratios cheat sheet and formulas. Liquidity and Profitability Ratios Definitions and Formulas 1. Liquidity Ratios Liquidity ratios are used to assess a company's capacity to pay off its debt without seeking external capital. Mostly used liquidity ratios are cash ratio, quick ratio, and current ratio. a. Cash Ratio The cash ratio is derived by dividing the cash and cash equivalents by the current liabilities. It assesses business liquidity by using the most liquid assets. Formula: Cash Ratio = Cash & Cash Equivalents / Current Liabilities b. Quick Ratio(Acid-Test) The quick ratio is more conservative compared to the current ratio. It is computed by adding cash & cash equivalents and receivables divided by current liabilities. Inventory is excluded since it takes more time to dispose of. Another way to compute is current assets – inventory divided by current liabilities. Formula 1: Quick Ratio = (Cash + Receivables)/Current Liabilities Formula 2: Quick Ratio = (Current Assets – Inventory) / Current Liabilities c. Current Ratio The current ratio evaluates current assets' availability to pay current obligations or those payable within a year. Current assets include cash & cash equivalents, receivables, and inventory. The current ratio is computed by taking current assets then divided by current liabilities. Formula :Current Ratio = Current Assets / Current Liabilities 2. Profitability Ratios Profitability ratios assess a company's ability to earn profit to its capital, equity, assets, revenue, and costs. These include gross profit margin, EBITDA margin, net profit margin, ROA, and ROE. a. Gross Profit Margin The gross profit margin is derived by taking the gross profit then divided by net sales. It shows the business's capacity to earn a profit after deducting COGS -- or revenue costs for a service industry. Formula: Gross Profit Margin = Gross Profit / Net Sales b. EBITDA Margin Production costs and operating expenses are deducted to derive Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA). The EBITDA margin is then computed by taking EBITDA divided by net sales. Formula: EBITDA Margin = EBITDA/ Net Sales c. Net Profit Margin Net income is calculated by deducting COGS, administrative & marketing expenses, interest, tax, depreciation, and amortization. Net income is divided by net sales to compute for net profit margin. Formula: Net Profit Margin = Net Income / Net Sales d. Return on Assets (ROA) Return on assets is most relevant for asset-intensive companies such as manufacturing plants and telecom. ROA measures how effectively a company utilizes assets to earn a profit. It is computed by adding the net income + interest divided by average assets. Formula: Return on Assets = (Net Income + Interest) / Average Assets e. Return on Equity (ROE) Return on equity assesses how much income is generated by the equity. It is evaluated by owners, investors, and analysts to measure how much can earn for every dollar invested. ROE is derived by taking the net income then divided by the average shareholders' equity. Formula: Return on Equity = Net Income / Average Shareholders’ Equity These financial ratios cheat sheet is helpful reference for definitions and formulas of liquidity and profitability ratios. You can also compute other financial ratios, such as the efficiency ratios, growth ratios, and leverage ratios, to make your analysis more comprehensive. |
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January 2021
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