CONFIDENTIAL -- AZ1.AI Inc. -- Internal Use Only
CFS-011: Financial Projections & Unit Economics
1. Executive Summary
The CODITECT Financial Suite financial model is driven by partner-led distribution with strong network effects. Each accounting firm partner brings 15-35 client subscriptions, creating a multiplier effect that dramatically reduces customer acquisition cost compared to direct-to-SMB models.
Key financial thesis: Low CAC (partner recruitment vs. individual SMB marketing), high LTV (firm-level retention is stickier than individual), and AI-driven cost efficiency (operating costs decline per client as AI automation improves).
2. Revenue Model
2.1 Revenue Streams
| Stream | Year 1 | Year 2 | Year 3 | Year 5 | Description |
|---|
| Client subscriptions | $1.17M | $6.53M | $25.9M | $196M | Per-client monthly fees ($39-79/client) |
| Add-on modules | $90K | $770K | $2.1M | $18M | AI Premium, Tax Engine, Practice Mgmt, E-invoicing |
| Implementation fees | $150K | $400K | $0 | $0 | Partner retains 100%; not CODITECT revenue |
| White-label fees | $8K | $50K | $200K | $1.5M | Setup fees + custom development for Platinum |
| Marketplace commission | $0 | $0 | $50K | $2M | Commission on third-party add-on sales (Phase 4+) |
| Total Revenue | $1.42M | $7.35M | $28.3M | $217.5M | |
2.2 Revenue Composition (Year 3)
| Component | Revenue | % of Total |
|---|
| Client subscriptions | $25.9M | 91.6% |
| Add-on modules | $2.1M | 7.4% |
| White-label + marketplace | $250K | 0.9% |
| Other | $50K | 0.2% |
2.3 ARPC (Average Revenue Per Client) Evolution
| Year | ARPC/Month | Growth Driver |
|---|
| Year 1 | $65 | Mix of Essential ($39) and Professional ($59) |
| Year 2 | $68 | Higher Professional tier adoption, add-on attach |
| Year 3 | $72 | Enterprise tier growth, increased add-on adoption |
| Year 4 | $75 | Upsell, consolidation module, advanced FP&A |
| Year 5 | $78 | Full module adoption, marketplace premium features |
3. Five-Year P&L Projection
3.1 Income Statement
| Line Item | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|
| Revenue | $1.42M | $7.35M | $28.3M | $79M | $217.5M |
| Cost of Revenue | ($426K) | ($1.84M) | ($5.94M) | ($14.2M) | ($34.8M) |
| Gross Profit | $994K | $5.51M | $22.4M | $64.8M | $182.7M |
| Gross Margin | 70% | 75% | 79% | 82% | 84% |
| | | | | |
| R&D (Engineering) | ($645K) | ($1.32M) | ($2.43M) | ($3.65M) | ($5.2M) |
| Sales & Marketing | ($464K) | ($1.1M) | ($4.25M) | ($9.5M) | ($19.6M) |
| General & Administrative | ($300K) | ($620K) | ($1.42M) | ($3.2M) | ($6.5M) |
| Partner Revenue Share | ($213K) | ($1.47M) | ($7.08M) | ($19.8M) | ($54.4M) |
| Total Operating Expenses | ($1.62M) | ($4.51M) | ($15.2M) | ($36.2M) | ($85.7M) |
| | | | | |
| Operating Income (EBITDA) | ($626K) | $1.0M | $7.2M | $28.6M | $97M |
| Operating Margin | -44% | 14% | 25% | 36% | 45% |
3.2 Cost of Revenue Breakdown
| Component | Year 1 | Year 3 | Year 5 | Per Client/Mo |
|---|
| Cloud infrastructure (GKE, GCS, Cloud SQL) | $120K | $1.2M | $4.5M | $1.79 |
| AI/ML inference (GPU + API) | $60K | $900K | $7.5M | $2.98 |
| Payment processing (2.5%) | $36K | $708K | $5.4M | $1.95 |
| Support team (Tier 2+) | $120K | $1.8M | $8.4M | $3.33 |
| Data storage and CDN | $30K | $480K | $2.4M | $0.95 |
| Third-party APIs and integrations | $30K | $420K | $3.0M | $1.19 |
| Compliance and security | $30K | $432K | $3.6M | $1.43 |
| Total COGS | $426K | $5.94M | $34.8M | $13.62 |
| COGS as % of revenue | 30% | 21% | 16% | |
4. Unit Economics
4.1 Per-Client Economics
| Metric | Year 1 | Year 3 | Year 5 (at scale) |
|---|
| ARPC (monthly) | $65 | $72 | $78 |
| ARPC (annual) | $780 | $864 | $936 |
| COGS per client (monthly) | $23.67 | $16.50 | $13.81 |
| Gross profit per client (monthly) | $41.33 | $55.50 | $64.19 |
| Gross margin per client | 63.6% | 77.1% | 82.3% |
| Partner revenue share (avg 22%) | $14.30 | $15.84 | $17.16 |
| Contribution margin per client (monthly) | $27.03 | $39.66 | $47.03 |
| Contribution margin % | 41.6% | 55.1% | 60.3% |
4.2 Per-Partner Economics
| Metric | Year 1 | Year 3 | Year 5 |
|---|
| Average clients per partner | 15 | 25 | 35 |
| Revenue per partner (monthly) | $975 | $1,800 | $2,730 |
| Revenue per partner (annual) | $11,700 | $21,600 | $32,760 |
| COGS per partner (monthly) | $355 | $413 | $483 |
| Partner share paid (monthly) | $215 | $396 | $601 |
| Net revenue per partner (monthly) | $405 | $991 | $1,646 |
| Net revenue per partner (annual) | $4,860 | $11,892 | $19,752 |
4.3 Customer Acquisition Cost (CAC)
| Component | Cost | Notes |
|---|
| Partner acquisition cost | $3,000 | Marketing + sales cycle + onboarding |
| Average clients per partner (Year 1) | 15 | Conservative first-year estimate |
| Effective CAC per client | $200 | $3,000 / 15 clients |
| Industry comparison (direct SMB) | $500-2,000 | Typical for direct-to-SMB SaaS |
| CAC advantage | 2.5-10x | Partner model dramatically reduces CAC |
4.4 Lifetime Value (LTV)
| Metric | Value | Calculation |
|---|
| Annual contribution per client | $476 | $39.66/mo x 12 (Year 3 contribution) |
| Average client lifetime | 5 years | Based on accounting software industry benchmarks |
| Gross client churn (annual) | 8% | Partner-managed = higher retention vs. self-serve |
| LTV per client | $2,380 | $476 x 5 years |
| LTV:CAC ratio | 11.9x | $2,380 / $200 |
| Industry benchmark | 3-5x | Best-in-class SaaS is 5x+ |
| CAC payback period | 5 months | $200 / $39.66 per month |
5. SaaS Metrics Dashboard
5.1 Key SaaS Metrics by Year
| Metric | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|
| ARR | $1.42M | $7.35M | $28.3M | $79M | $217.5M |
| MRR | $118K | $613K | $2.36M | $6.58M | $18.1M |
| Partners | 100 | 400 | 1,200 | 3,000 | 6,000 |
| End Clients | 1,500 | 8,000 | 30,000 | 90,000 | 210,000 |
| ARPC (monthly) | $65 | $68 | $72 | $75 | $78 |
| Gross Margin | 70% | 75% | 79% | 82% | 84% |
| Net Revenue Retention | 105% | 115% | 125% | 130% | 135% |
| Gross Churn (clients) | 12% | 10% | 8% | 7% | 6% |
| Net Churn (revenue) | -5% | -15% | -25% | -30% | -35% |
| LTV:CAC | 8x | 10x | 12x | 13x | 14x |
| CAC Payback (months) | 7 | 6 | 5 | 4.5 | 4 |
| Magic Number | 0.6 | 1.2 | 1.8 | 2.1 | 2.3 |
| Rule of 40 | -10% | 50% | 70% | 80% | 85% |
5.2 Net Revenue Retention Drivers
| Driver | Contribution |
|---|
| Tier upgrades (Essential -> Professional -> Enterprise) | +8% |
| Add-on module adoption | +12% |
| Client growth (partner adds more clients) | +10% |
| Price increases (annual ~3-5%) | +5% |
| Gross churn offset | -8% |
| Net Revenue Retention | ~127% (Year 3 blended) |
6. Cash Flow Projection
6.1 Monthly Cash Flow (Year 1)
| Month | Revenue | Expenses | Cash Flow | Cumulative |
|---|
| M1 | $5K | $100K | ($95K) | ($95K) |
| M2 | $12K | $105K | ($93K) | ($188K) |
| M3 | $25K | $110K | ($85K) | ($273K) |
| M4 | $50K | $120K | ($70K) | ($343K) |
| M5 | $85K | $130K | ($45K) | ($388K) |
| M6 | $120K | $135K | ($15K) | ($403K) |
| M7 | $155K | $150K | $5K | ($398K) |
| M8 | $190K | $155K | $35K | ($363K) |
| M9 | $225K | $160K | $65K | ($298K) |
| M10 | $260K | $165K | $95K | ($203K) |
| M11 | $295K | $170K | $125K | ($78K) |
| M12 | $330K | $180K | $150K | $72K |
Break-even: Month 12 (cumulative cash flow positive)
6.2 Annual Cash Flow
| Year | Operating Cash Flow | CapEx | Free Cash Flow | Cumulative FCF |
|---|
| Year 1 | ($403K) | ($50K) | ($453K) | ($453K) |
| Year 2 | $1.5M | ($100K) | $1.4M | $947K |
| Year 3 | $8.5M | ($250K) | $8.25M | $9.2M |
| Year 4 | $30M | ($500K) | $29.5M | $38.7M |
| Year 5 | $100M | ($1M) | $99M | $137.7M |
7. Funding Requirements
7.1 Capital Needs Assessment
| Scenario | Funding Required | Runway | Path to Profitability |
|---|
| Bootstrapped | $0 (self-funded from AZ1.AI revenue) | 12 months to break-even | Month 12 |
| Seed Round | $1M-2M | 24 months | Month 8 (accelerated growth) |
| Series A | $5M-10M | 36 months | Aggressive expansion, 15+ jurisdictions by Month 18 |
7.2 Use of Funds (If Seed: $1.5M)
| Allocation | Amount | % | Purpose |
|---|
| Engineering team | $600K | 40% | Accelerate Phase 1-2, hire 5 additional engineers |
| AI/ML development | $225K | 15% | GPU infrastructure, model training, API costs |
| Sales & marketing | $300K | 20% | Partner recruitment, events, content, advertising |
| Partner success | $150K | 10% | Onboarding team, training platform, support |
| Infrastructure | $75K | 5% | Cloud infrastructure, security certifications |
| Operations & legal | $75K | 5% | Compliance, legal, accounting, insurance |
| Reserve | $75K | 5% | Contingency buffer |
7.3 Valuation Framework
| Metric | Value | Multiple | Implied Valuation |
|---|
| Year 1 ARR | $1.42M | 15-20x (early-stage AI SaaS) | $21-28M |
| Year 2 ARR | $7.35M | 12-18x | $88-132M |
| Year 3 ARR | $28.3M | 10-15x | $283-425M |
| Year 5 ARR | $217.5M | 8-12x (growth-adjusted) | $1.74-2.61B |
Comparable transactions: Vic.ai ($100M+ valuation at $10M ARR), Xero ($5B at ~$1B ARR), Sage ($13B at ~$2B ARR).
8. Sensitivity Analysis
8.1 Revenue Sensitivity
| Variable | Bear Case (-30%) | Base Case | Bull Case (+30%) |
|---|
| Partners (Year 3) | 840 | 1,200 | 1,560 |
| Clients per partner | 18 | 25 | 33 |
| ARPC | $58 | $72 | $86 |
| Year 3 ARR | $10.5M | $28.3M | $53.2M |
8.2 Margin Sensitivity
| Scenario | Gross Margin | Operating Margin | Impact |
|---|
| High AI costs (+50%) | 74% | 20% | AI infrastructure more expensive, offset by higher accuracy |
| Low partner retention (70%) | 79% | 18% | Higher churn = more recruitment spend, lower NRR |
| Price pressure (-15%) | 79% | 19% | Competitive response from incumbents |
| Regulatory delay | 79% | 22% | Fewer jurisdictions = lower TAM but lower compliance spend |
| Base case | 79% | 25% | |
8.3 Break-Even Sensitivity
| Scenario | Break-Even Month | Cumulative Investment to Break-Even |
|---|
| Aggressive (Bull) | Month 8 | $280K |
| Base | Month 12 | $403K |
| Conservative (Bear) | Month 18 | $720K |
| Worst case | Month 24 | $1.2M |
9. Competitive Pricing Benchmark
9.1 Price Comparison (Per Client/Month)
| Competitor | Entry Price | Mid-Tier | Enterprise | AI Premium |
|---|
| QuickBooks Online | $30 | $55 | $200 | N/A |
| Xero | $15 | $42 | $78 | N/A |
| Sage Intacct | N/A | $400+ | $1,000+ | N/A |
| Oracle NetSuite | N/A | $999+ | $2,000+ | $200+ |
| Omie (Brazil) | R$99 | R$199 | R$299 | N/A |
| ContaAzul (Brazil) | R$69 | R$119 | N/A | N/A |
| CODITECT | $39 | $59 | $79 | $10 |
9.2 Value-Per-Dollar Analysis
| Feature Density | CODITECT ($59) | Xero ($42) | QBO ($55) | Sage ($400+) |
|---|
| Multi-currency GL | Included | Included | Limited | Included |
| AI document processing | Included | N/A | Basic | N/A |
| NLQ (natural language) | Included | N/A | N/A | N/A |
| Forecasting (AI) | Included | N/A | N/A | Basic |
| Multi-entity | Included | Extra cost | Extra cost | Included |
| Practice management | Add-on ($15/staff) | Third-party ($30+/user) | Third-party ($30+/user) | Third-party |
| E-invoicing | Included | Limited | N/A | Extra cost |
| SPED compliance | Included | N/A | N/A | Extra cost |
| Total feature value | $59 | $72+ | $85+ | $400+ |
CODITECT delivers more features at a lower price point -- sustainable because AI automation replaces human-intensive backend costs that competitors carry.
10. Investment Return Scenarios
10.1 Investor Return (Seed $1.5M at $15M Pre-Money)
| Outcome | Year 3 Valuation | Investor Equity (9.1%) | Return Multiple |
|---|
| Bear case | $100M | $9.1M | 6.1x |
| Base case | $350M | $31.8M | 21.2x |
| Bull case | $600M | $54.5M | 36.3x |
10.2 Key Value Creation Events
| Event | Timeline | Valuation Impact |
|---|
| Product launch + 100 partners | Month 6 | Seed valuation ($15-25M) |
| $5M ARR + NRR >120% | Month 15 | Series A ($60-100M) |
| $25M ARR + international expansion | Month 24 | Series B ($250-400M) |
| $100M ARR + market leadership | Month 36 | Series C/Growth ($800M-1.2B) |
| $200M+ ARR + profitability | Month 48 | Pre-IPO ($1.5-2.5B) |
11. Financial Model Assumptions
11.1 Core Assumptions
| Assumption | Value | Basis |
|---|
| Average clients per partner (Year 1) | 15 | Conservative; industry avg for new software is 10-20 |
| Average clients per partner (Year 5) | 35 | Maturity + larger firms joining later phases |
| Monthly client churn | 0.7% (Year 1), 0.5% (Year 5) | Partner-managed = lower than self-serve (0.8-1.5%) |
| Partner annual churn | 20% (Year 1), 8% (Year 5) | High initial churn, stabilizing with success |
| ARPC growth | 3-5% annually | Tier upgrades, add-on adoption, modest price increases |
| Partner revenue share (blended) | 22% | Weighted by tier (15-30% range) |
| Cloud cost per client decrease | 10% annually | Infrastructure optimization, economies of scale |
| AI cost per client decrease | 15% annually | Model efficiency improvements, local model migration |
| Support cost per client decrease | 8% annually | AI-assisted support, partner self-service |
11.2 Growth Assumptions
| Assumption | Value | Basis |
|---|
| Partner acquisition rate | 8 (M1), growing to 30/month (M12) | Ramp with marketing + events + referrals |
| Clients per new partner (first year) | 10 growing to 20 | Ramp as partners build pipeline |
| Existing partner client growth | +5 clients/year | Organic growth from firm expansion |
| New jurisdiction multiplier | 1.3x partner acquisition per new country | Each new market opens partner pipeline |
| Viral coefficient (partner referral) | 0.15 | 15% of new partners come from existing partner referral |
Hal Casteel
CEO/CTO, AZ1.AI Inc.
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