Financial Modeler's Corner

Mastering SaaS Models: Derek Baker's insights on building robust SaaS models

Feb 29, 2024

Derek Baker shares insights on building robust SaaS models, emphasizing the importance of understanding a business for better modeling. He discusses controversial modeling issues, including circular references and AI in modeling. The podcast covers topics like the challenges of data accuracy in early-stage SaaS startups and strategies for building SaaS models. Additionally, Derek talks about dynamic arrays in financial modeling and the importance of aligning financial models with business operations.

38:02

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Episode guests

Derek Baker

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Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Deep understanding of business operations is essential for successful financial modeling.

Dynamic arrays enhance modeling capabilities for more flexible calculations.

Self-referencing IF statements offer powerful scenario analysis within financial models.

Deep dives

Modeling Operation Flows for Balance Sheet Accounts

Modeling the flows of balance sheet accounts like host payable and property protection plan reserves provided valuable insights into operational cash flow management, highlighting areas for improvement and helping understand cash inflows and outflows.

Introduction

2min

Journey of Building Financial Models

14min

Insights on Tools and Key Differences in SaaS Financial Modeling

3min

Navigating Deferred Revenue and Revenue Recognition in SaaS Models

3min

Exploring Strategies for Building SaaS Models and Financial Learning Resources

2min

Exploring Dynamic Arrays in Financial Modeling

12min

Insights on Business Acumen and Partnering with Business for Financial Modelers

2min

In this episode, Paul Barnhurst is joined by Derek Baker, who is drawn to really hard problems. Derek discovered early in his career that he loves startups and building companies.

He began his career working for SaaS startups, building out their core FP&A processes. For many of the companies he worked with, he was building their very first financial model to help them operate the business and make capital allocation decisions. He found that every business - regardless of stage - can improve performance with excellent FP&A.

Today, he works at Neighbor.com, a Series B startup, building the “Airbnb” of personal storage. Building the FP&A function for a marketplace has been the biggest challenge of his career, and he is loving every minute of it.

Listen to this episode as Derek shares:

How he got into financial modeling for SaaS companies
His advice for building robust SaaS Models.
The importance of understanding a business to build better Models.
Everything about SaaS and SaaS Companies.
His position on controversial modeling issues, including circular references, dynamic arrays, modeling standards, AI in modeling, and more.

Quotes:

“ The only way you're really going to learn how to build a model is by building it. You can do all the study you want, but at the end of the day, it's like anything, without practice, it's just theory. ”

“ The better you know an industry, the better you know the operations of the business, the easier it is to build a model.”

“ [ What separates good FP &A from great FP & A] I think it's 1- business acumen and 2- business partnering. Anyone can build a model in Excel and can learn those technical skills. But using those technical skills to help the business and partner with the business to help them understand the business better and grow the business is exactly what FP&A should be doing....”

Sign up for the Advanced Financial Modeler Accreditation or FMI Fundamentals Today and receive 15% off by using the special show code ‘Podcast’.

Visit https://fminstitute.com/podcast/and use code Podcast to save 15% when you register.

Go to https://earmarkcpe.com , download the app, take the quiz and you can receive CPE credit.

Follow Derek:

LinkedIn - https://www.linkedin.com/in/derek-d-baker/
Website - https://community.plan-buddies.com/home

Follow Paul:

Website - https://www.thefpandaguy.com/
LinkedIn - https://www.linkedin.com/in/thefpandaguy/
TikTok - https://www.tiktok.com/@thefpandaguy
YouTube - https://www.youtube.com/@thefpaguy8376

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In today’s episode:

(00:22) Intro;

(00:45) Welcoming Derek;

(01:00) The worst Financial Model Derek has ever seen ;

(02:00) Key takeaways from the worst Financial Model;

(02:41) Derek’ s background;

(04:41) Experience and Challenges while building the first Financial Model;

(07:20) What Derek thinks was missing from Finance Education in school?;

(10:13) What is it that Derek likes about SaaS and SaaS companies?;

(12:31) Key inputs in SaaS Revenue Models;

(15:08) What is the first tool that SaaS Startups must invest in?;

(16:40 - 17:25) Validate your Financial Modeling Skills with FMI’s Accreditation Program (ad ) ;

(17:26) Building a Three Statement Model - SaaS vs other Industries;

(19:00) Building Deferred Revenue;

(21:56) How to get started with building SaaS Models?;

(24:05) How often does Derek use Dynamic Arrays?;

(27:20) One thing that helped Derek in building Financial Models;

(29:20) Technical advice that can help people become better Modelers;

(32:26) Derek’s favorite Excel Shortcut;

(32:58) Rapid Fire;

(36:09) Nugget;

(36:55) Connect with Derek;

(37:21) Outro;

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Financial Modeler's Corner

Mastering SaaS Models: Derek Baker's insights on building robust SaaS models

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Modeling Operation Flows for Balance Sheet Accounts

Utilizing Dynamic Arrays in Modeling

Building Scenario Comparisons with Self-Referencing IF Statements

Importance of Business Acumen in Financial Modeling

Connecting with Derek Baker

Remember Everything You Learn from Podcasts