CLIENT SUCCESS: From 20 Hours to 2 Hours Per Week

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WELCOME TO ISSUE NO #064

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📆 Today’s Rundown

Hey 👋, hope you had a great week! In the last issue, we discussed why tracking CARR & CMRR matter, and now we are moving with the next topic from Revenue, ARR and MRR content.

Let’s talk about ⬇️

CARR vs CMRR: A SaaS Guide to Committed Revenue

Most founders think EBITDA tells the full story of their company’s profitability.

It ignores one key element that can make or break your valuation — deferred revenue.

That’s where Cash Adjusted EBITDA (or Cash EBITDA) comes in.

And today, I’ll walk you through 5 things you need to know about it — so you can finally see what your profitability really looks like.

TL;DR

1️⃣ What Cash Adjusted EBITDA actually is

2️⃣ When to use it

3️⃣ How to calculate it

4️⃣ Common mistakes to avoid

5️⃣ Why it matters for SaaS founders

1️⃣ What Cash Adjusted EBITDA actually is

Cash Adjusted EBITDA =
EBITDA + Year-over-Year Deferred Revenue

It’s the same familiar formula (earnings before interest, taxes, depreciation & amortization), but with one critical twist — it includes revenue you’ve already collected but haven’t delivered yet.

That makes it a truer reflection of cash-based performance, especially for SaaS and subscription models where customers prepay for annual contracts.

2️⃣ When to use it

Cash Adjusted EBITDA shines in valuation and investor conversations.

Why? Because it answers a simple but crucial question:

Imagine you’re raising a round or exploring an acquisition.

• Traditional EBITDA might show $800K profit.

• But once you add deferred revenue from annual prepayments, your Cash Adjusted EBITDA jumps to $1.2M.

That’s a 50% stronger cash performance — and it immediately changes how investors perceive your value.

3️⃣ How to calculate it

Here’s the formula in full:

Cash Adjusted EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization + Non-Cash Adjustments + Deferred Revenue – One-Time Expenses

✅ Include:

• Deferred revenue (payments received for services not yet rendered)

• Add-backs like non-recurring costs, owner expenses, or goodwill impairments

❌ Don’t include:

• One-time boosts that artificially inflate profit (e.g. one-off donations or asset sales)

Example:
Let’s say your SaaS business:

• Earned $1M in subscriptions

• Has $400K net income

• $50K amortization

• $100K in add-backs

• $20K in new deferred revenue

Your Cash Adjusted EBITDA =
$1M + $400K + $50K + $100K + $20K = $1.57M

That’s the number investors actually care about.

4️⃣ Common mistakes to avoid

A few traps founders fall into:

• Overinflating profitability.
  Adding back too much (or calling recurring costs “non-recurring”) makes you look good on paper but weak in diligence.

• Forgetting intercompany accounting.
  If your business shares costs or revenue with related entities, they must be factored in.

• Missing deferred revenue.
  The biggest miss. SaaS businesses often forget to include prepaid subscriptions — which can drastically understate their real performance.

5️⃣ Why it matters for SaaS founders

Cash Adjusted EBITDA gives you a cash-first view of performance.

When you track it consistently, you can:

• See how deferred revenue impacts cash flow timing

• Align finance with sales and billing cycles

• Present true profitability to investors or buyers

• Benchmark against peers using cash-based metrics

In short — it shows not just what you earned, but what you’ve earned and already collected.

Need clarity on your financial strategy or cash flow optimization?

I'm Aleksandar, fractional CFO at Fiscallion, where we help founders like you achieve financial clarity, streamline reporting, and build investor-ready forecasts.

Ready to level up your finances?

The takeaway:

If you’re still looking only at EBITDA, you’re missing the full picture.
Start tracking Cash Adjusted EBITDA this quarter — and you’ll understand your business the way investors do.

Chat soon,

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