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, the challenges faced in financial modeling, importance of business understanding, controversial modeling issues, and the evolution of Excel functionalities. He emphasizes the significance of continuous practice to improve modeling skills and the importance of business acumen for financial modelers.

38:02

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Episode guests

Derek Baker

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Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Modeling cash flows enhances business insights by detecting inefficiencies and enhancing accuracy.

Leveraging dynamic arrays in financial models increases efficiency and versatility, streamlining calculations and automating processes.

Deep dives

Understanding the Importance of Business Operations in Financial Modeling

Modeling the flows of different aspects within a business, such as cash flows on the balance sheet, provides valuable insights into the business's operations. By comprehensively modeling these flows, like understanding how collections and payments correlate, financial modelers can detect inefficiencies or leakage points, enhancing the accuracy and effectiveness of the financial model.

Introduction

2min

Challenges and Evolution in Financial Modeling

14min

Analyzing Tools for SaaS Analytics and Key Differences in SaaS Three Statement Models

3min

Understanding Deferred Revenue in SaaS Models

5min

Evolution of Excel Functionalities and Importance of Modeling Cash Flows

12min

Importance of Business Acumen in Financial Modeling

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

Understanding the Importance of Business Operations in Financial Modeling

Incorporating Dynamic Arrays in Financial Modeling

Strategic Use of Circular References for Scenario Comparison

Enhancing Financial Modeling Through Strong Business Acumen

Remember Everything You Learn from Podcasts