Financial Modeling: SaaS Economics for Core Banking
Build investor-ready financial models including pricing strategy, revenue projections, unit economics, and path to profitability for core banking SaaS.
SaaS Financial Fundamentals
Building a sustainable core banking business requires deep understanding of SaaS economics. This chapter covers pricing strategy, revenue modeling, unit economics, and the path to profitability—with templates you can adapt for your own financial planning.
Investors evaluate SaaS businesses on specific metrics: ARR (Annual Recurring Revenue), CAC (Customer Acquisition Cost), LTV (Lifetime Value), LTV/CAC ratio, Net Revenue Retention, and CAC Payback Period. Understanding and optimizing these metrics is essential for fundraising and sustainable growth.
Pricing Strategy
Pricing Models Comparison
| Model | Description | Pros | Cons |
|---|---|---|---|
| Subscription (Flat) | Fixed monthly/annual fee | Predictable revenue, simple | Does not scale with usage |
| Usage-Based | Pay per transaction, API call | Scales with customer success | Unpredictable, hard to forecast |
| Tiered | Feature-based packages | Clear upgrade path, balances both | Complexity, potential feature gaps |
| Hybrid | Base subscription + usage | Predictable base + upside | More complex to explain |
Recommended Pricing Tiers
| Tier | Monthly Price | Target Segment | Key Features |
|---|---|---|---|
| Starter | EUR 3,000-5,000 | Early-stage neobanks | Core ledger, basic APIs, 1 product template |
| Growth | EUR 8,000-15,000 | Growth fintechs, SME lenders | Full API, 10 templates, basic analytics |
| Professional | EUR 15,000-25,000 | Established fintechs | AI/ML, full marketplace, advanced analytics |
| Enterprise | EUR 25,000-50,000+ | Regional banks | Custom SLAs, dedicated support, compliance |
This pricing positions the platform at 40-60% below Thought Machine (EUR 40K-80K/month) and 20-40% below Mambu (EUR 15K-35K/month), while maintaining healthy margins through multi-tenant efficiency.
Revenue Projections
Conservative 3-Year Model
| Metric | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| New Customers | 5 | 18 | 35 |
| Total Customers (EOY) | 5 | 22 | 55 |
| Average Contract Value | EUR 72,000 | EUR 85,000 | EUR 100,000 |
| New ARR | EUR 360,000 | EUR 1,530,000 | EUR 3,500,000 |
| Churned ARR (5%) | EUR 0 | EUR 18,000 | EUR 95,000 |
| Expansion ARR (10%) | EUR 0 | EUR 36,000 | EUR 190,000 |
| Ending ARR | EUR 360,000 | EUR 1,908,000 | EUR 5,503,000 |
Unit Economics
Customer Acquisition Cost (CAC)
CAC = (Sales and Marketing Spend) / (New Customers Acquired)
Example Year 2:
Sales and Marketing Spend: EUR 600,000
New Customers: 18
CAC = EUR 600,000 / 18 = EUR 33,333Lifetime Value (LTV)
LTV = (Average Contract Value x Gross Margin) / Churn Rate
Example:
ACV: EUR 85,000
Gross Margin: 75%
Annual Churn: 8%
LTV = (EUR 85,000 x 0.75) / 0.08 = EUR 796,875Key Ratios
| Metric | Target | Model Result | Assessment |
|---|---|---|---|
| LTV/CAC Ratio | Over 3.0x | 5.0x+ | Excellent |
| CAC Payback Period | Under 12 months | 4-6 months | Excellent |
| Gross Margin | Over 70% | 75-80% | Strong |
| Net Revenue Retention | Over 100% | 105-110% | Healthy |
| Annual Churn | Under 10% | 5-8% | Good |
LTV/CAC of 5.0x means every EUR 1 spent on customer acquisition generates EUR 5 in lifetime value—a highly efficient growth engine. This ratio enables aggressive but sustainable scaling and makes the business attractive to growth investors.
Path to Profitability
Break-Even Analysis
| Scenario | ARR at Break-Even | Customers Needed | Timeline |
|---|---|---|---|
| Conservative | EUR 6.5M | 65-70 | Month 42-48 |
| Base Case | EUR 5.5M | 55-60 | Month 36-42 |
| Optimistic | EUR 4.5M | 45-50 | Month 30-36 |
Funding Requirements
| Round | Amount | Timing | Use of Funds |
|---|---|---|---|
| Seed | EUR 2.0M | Month 1 | MVP development, first hires |
| Series A | EUR 3.0-4.0M | Month 12-14 | Scale team, first customers |
| Series B | EUR 5.0-7.0M | Month 24-28 | Market expansion, enterprise features |
| Total | EUR 10-13M | - | Path to profitability |
Sensitivity Analysis
Key variables that impact financial outcomes:
| Variable | Base Case | Impact of +/- 20% |
|---|---|---|
| Customer Acquisition Rate | 18 customers/year | ARR varies +/- EUR 1.5M by Year 3 |
| Average Contract Value | EUR 85K | ARR varies +/- EUR 1.1M by Year 3 |
| Churn Rate | 5% annual | ARR varies +/- EUR 400K by Year 3 |
| Sales Cycle Length | 8 weeks | Cash runway varies +/- 3 months |
SaaS businesses are cash-intensive early on. You pay for customer acquisition upfront but receive revenue over time. Plan for 18+ months of runway and start fundraising when you have 9 months remaining.
Investor Metrics That Matter
What Series A/B investors look for in core banking:
- ARR Growth Rate: Target 3x year-over-year in early years
- Logo Count: Number of customers matters for social proof
- Net Revenue Retention: Over 100% shows expansion and low churn
- Gross Margin: Over 70% expected for SaaS
- Magic Number: Net new ARR / Sales & Marketing spend - target over 0.75
Hybrid pricing maximizes value. Base subscription for predictability plus usage-based pricing for upside creates optimal revenue model for both vendor and customer.
Unit economics must be strong from day one. Target LTV/CAC over 3.0x, CAC payback under 12 months, and gross margins over 70%. These ratios determine fundraising success and sustainable growth.
Break-even in 36-48 months is realistic. With EUR 10-13M total funding, a core banking platform can reach profitability with 55-70 customers at EUR 85K-100K ACV.