Successful Optimization of Unit Economics for SaaS Company

Our client is a fast-growing SaaS company facing severe operational and financial challenges due to improper cost allocation and a lack of automated systems for tracking key performance metrics. And these challenges are familiar to every SaaS business owner.

Unit economics for SaaS is the foundation of sustainable scaling. But collecting data manually from multiple systems every month is a real struggle. When every report turns into a numbers hunt, and calculations rely on rough estimates that "seem about right," risks escalate.

1. Lack of proper cost categorization (if the company pays for something, it is treated as a current-period expense) and automated accounting.
2. No data update system to track cost fluctuations.
3. Incorrect allocation of costs between production, sales, and operational expenses.
4. Misclassification of costs as product COGS, including unrelated expenses.

One of the biggest issues was customer support: the team served both existing users and potential clients on trial versions.

Additionally, website development costs (which were merely a sales showcase) were mistakenly included in the product’s COGS.

All new feature development was treated as a current-period expense rather than amortized over a defined period as an intangible asset. This led to significant cost fluctuations and artificially inflated short-term product costs.

Moreover, when calculating LTV, the lifetime value of different product packages was ignored. This averaged out results and led to decision-making based on broad assumptions rather than focusing on the most profitable packages for strategic growth.

Another common mistake involved development costs for internal tools. The company built custom CRM systems and analytics platforms for user monitoring, yet these expenses were incorrectly included in CAC instead of being classified as operational expenses (OPEX).

Additionally, technical support costs were often evenly distributed across all company products, even if support was only provided for a fraction of them. This resulted in overestimated costs for some products and underestimated costs for others.

Another complexity was determining where to allocate executive salaries. For instance, the CTO was not only managing development but also analyzing the market and selecting new features for development. Due to this multitasking, many companies struggle to classify their salaries correctly: partly as product development expenses, partly as operational costs, or even as strategic marketing expenses. Misclassifying these costs can significantly distort a product’s real unit economics.

At first glance, calculating SaaS unit economics may seem simple — plug a few key metrics into a formula, and there’s your answer. But without a systematic approach, you are likely to get misleading numbers, leading to poor business decisions.

• QBO;
• Jira;
• Google Spreadsheets.

To resolve these challenges, we developed a clear strategy:

1. Cost Categorization:
   
   • We divided costs into three key categories: Customer Acquisition Costs (CAC), Cost of Goods Sold (COGS), and Operating Expenses (OPEX);
   • Identified which resources were directed toward production and which were marketing-related.
2. COGS Correction:
   
   • Excluded non-essential costs, such as website development, from COGS;
   • Introduced SaaS product capitalization, ensuring that feature development costs were amortized over time. This provided a more realistic picture of product costs.
3. Personnel Cost Allocation:
   
   • Employees working across both production and sales were assigned proportionally to their respective cost categories.
4. Support Cost Optimization:
   
   • Support expenses were split between serving existing customers and potential leads on trial versions. This allowed accurate CAC calculations.
5. Automation of Calculations:
   
   • Emphasized that for SaaS companies, monthly data updates are critical;
   • Suggested integrating automated tracking systems for real-time monitoring of key cost metrics such as marketing and production expenses.

Main results:

• Improved financial accuracy: Proper cost categorization and allocation provided the company with a clear understanding of its profitability;
• Efficient cost management: Automated updates allowed for quick responses to changes and better decision-making regarding pricing and marketing strategies;
• Sustainable growth: Clear visibility into acquisition and production costs enabled the company to scale without excessive spending;
• Granular unit economics insights: Allowed for more strategic investment in marketing and product packages with the highest return.

Key Takeaways for SaaS Companies:

• Unit economics must be constantly updated: Monthly cost and data updates help avoid financial pitfalls;
• Automation is a necessity: Manual tracking slows down processes and increases errors;
• Proper cost categorization prevents miscalculations: Understanding which costs directly impact product delivery vs. marketing and sales is critical for growth.

This case study proves that without accurate calculations and automated systems, SaaS companies risk losing financial control. Finmates.Pro provided the tools and strategies needed to ensure sustainable growth and profitability.