SaaS Growth Benchmarks: Company Growth Rates and Metrics
What are some typical SaaS growth benchmarks? How quickly to public companies grow? What about small private ones?
In this guide, we've discovered real benchmarks based on studies of SaaS companies. Plus, we show you several important SaaS metrics to track in order to inform and execute your growth strategy. These benchmarks and metrics will motivate you whether you're running an early stage SaaS company or a publicly traded one.
SaaS growth benchmarks for private companies
Median year over year (YOY) growth rate
According to SaaS Capital's study of private SaaS companies:
Companies with less than $1 million in ARR have a median YOY growth rate of 68%.
Companies with $1-3 million in ARR have a median YOY growth rate of 45%.
Companies with $3-5 million in ARR have a median YOY growth rate of 35%.
Companies with $5-10 million in ARR have a median YOY growth rate of 40%.
Companies with $10-20 million in ARR have a median YOY growth rate of 33%.
Companies with over $20 million in ARR have a median YOY growth rate of 35%.
90th percentile growth rates
The same study by SaaS Capital study found that:
The 90th percentile of companies making under $1 million in ARR grow at a rate of 242%
The 90th percentile of companies making $1-3 million in ARR grow at a rate of 252%
The 90th percentile of companies making $3-5 million in ARR grow at a rate of 160%
The 90th percentile of companies making $5-10 million in ARR grow at a rate of 100%
The 90th percentile of companies making $10-20 million in ARR grow at a rate of 99%
The 90th percentile of companies making over $20 million in ARR grow at a rate of 90%
Gross retention
According to SaaS Capital, "The median gross retention for all companies with at least $1 million in ARR is 91%."
Companies with a gross retention rate of over 91% grow at a median rate of 35% YOY.
Companies with a gross retention rate of under 91% grow at a median rate of 23% YOY.
SaaS growth benchmarks for publicly traded companies
Growth after IPO
According to OpenView's Expansion SaaS Benchmarks report, companies grow at a rate of 57.7% after they IPO.
Customer acquisition cost (CAC) payback
The average time to payback customer acquisition costs for publicly traded SaaS companies is 11 months, according to OpenView's report.
Average contract value (ACV)
"Success stories like HubSpot, Zipwhip and OutSystems teach us to (1) start with a low-risk opportunity, (2) generate early wins, (3) use the learnings to improve the product for all customers." - OpenView's Expansion SaaS Benchmarks report
15% of PLG companies making less than $1 million in ARR have an average contract value above $25k.
59% of non-PLG companies making less than $1 million in ARR have an average contract value of $25k.
66% of PLG companies making over $50 million in ARR have an average contract value above $25k.
75% of non-PLG companies making over $50 million in ARR have an average contract value above $25k.
Satisfaction with VCs
According to OpenView:
30% of founders wouldn't recommend their VC firms to other founders.
31% feel neutral about their VCs.
39% are satisfied with their VCs.
Fewer founders feel concerned about fundraising (15% in 2020 were worried about being able to fundraise, compared to 32% in 2019).
Clearly, this means that there is plenty of capital to go around. So be careful who you take dollars from, and make sure to choose a partner that will help you grow your business and be easy to work with. Reach out to other founders whose companies are part of that VC's portfolio in order to find out what it will really be like to work with them.
SaaS growth metrics to measure and improve
Here are some important SaaS growth metrics to benchmark and continually improve upon.
ARR
As you surely know, ARR stands for annual recurring revenue, and is a key metric for any SaaS company to measure. From here, you can measure growth and ROI.
To calculate ARR, you should add up the MRR from existing customers, new customers, and upgrades. Then subtract and churned customers and downgraded amounts. Then multiply that total by 12 in order to calculate your subscription recurring revenue annually.
ARR growth
One of the most important metrics to track is your ARR growth. You can track this YoY every month. So, let's say it's September. You would take your ARR metric for this September and compare it to the ARR metric from last September.
The calculation is: (Current ARR - Previous ARR) x 100.
CAC
Your customer acquisition costs refer to how much it costs to acquire a paying customer (not a free user).
To calculate this, add up everything you've spent on marketing, sales, and acquisition-related engineering during a period of time, such as the past 12 months. Then divide that by how many customers you got in the same time period.
CAC payback
Your CAC payback rate calculates how many months it takes for you to payback your customer acquisition cost.
To calculate it, divide your CAC by the average monthly subscription fee.
For example, if you CAC is $70 and your average monthly subscription fee is $35, then it will take you 2 months to payback the CAC. In other words, it takes 2 months to break even. So, your customer retention rate needs to be at least 3 months in order for you to have some profit.
Net dollar retention
Net dollar retention is a percentage of ARR. It's a revenue metric that puts your ARR into better context by incorporating both growth and churn.
To calculate NDR:
(Beginning ARR - Churn + Expansion) ÷ Beginning ARR.
By calculating this, you'll be able to track how your ARR is growing.
Engineering spend
When it comes to figuring out revenue, companies often forget to include engineering spending in their calculations. It's important to track how much you are spending on development salaries, freelancers, agencies, and software.
This will help you see your engineering team's growth potential and will make your ROIIC calculations more accurate.
If you want to forecast profitability, make sure to check your product roadmap in order to estimate upcoming costs.
Marketing spend
To calculate your marketing spend, you need add up all of the salaries, freelancers, agencies, software, resources, and advertising spend.
Again, this will come into play when calculating ROIIC.
Sales spend
To tally up your sales spend, add up salaries, freelancers, agencies, and software.
If your sales team travels to client meetings or attends industry events, make sure to include those business travel costs as well.
ROIIC
This stands for return on incremental invested capital. Rather than just calculating the ROI of sales and marketing, you'll calculate the ROI of every investment. Product and engineering teams have a massive impact on revenue, especially where PLG companies are concerned.
So, you'll take your non-revenue generating expenses, such as general business and administrative costs, and remove them from your gross profit. Then you'll divide that amount by every
The calculation is (Gross Profit - General & Administrative Expenses) ÷ (Sales & Marketing + Product & Engineering Expenses).
Sales-led, outbound, and paid acquisition rate
It's important to calculate how much of your customer acquisition success is stemming from the sales team, outbound motions, and paid channels.
To calculate this, add up what you're investing in all of these channels and use this calculation to discover the percentage of customers coming from these channels.
(Total Number of Customers from These Channels for 12 Months) ÷ (Total Number of All Customers for 12 Months) x 100.
Organic acquisition rate
Next, you're going to want to know how much of your customer acquisition is organic. The more your business grows, the higher your organic acquisition rate should be. Implementing white label SEO services can significantly boost this organic growth, offering a reliable strategy for expanding reach.
The channels to include should be PLG-focused engineering, SEO, and any referral rewards that you offer.
(Total Number of Customers from These Channels for 12 Months) ÷ (Total Number of All Customers for 12 Months) x 100.
Net MRR churn
This metric helps you uncover the rate of churned MRR relative to your starting MRR. A healthy SaaS business usually has this rate at 9% or lower.
Here's how to calculate it:
(Churned MRR - Expansion MRR) ÷ (Starting MRR) x 100.
Net MRR growth
This metric helps you figure out how rapidly your MRR is growing. It's similar to ARR, except that instead of calculating this YoY, you calculate it MoM. For fast-growing companies (or companies that want to grow quickly), this is an essential metric to track.
Here's how to calculate net MRR growth:
(Net MRR in any month - Net MRR from the prior month) ÷ (Net MRR from the prior month) x 100.
Customer churn rate
This metric helps you understand the percentage of customers lost.
Here's how to calculate customer churn:
(Number of customers lost during any time period ÷ Number of customers at the start of the same time period) x 100.
LTV
Customer lifetime value is an important metric to track in order to calculate your business's profitability.
Although the metric has "lifetime" in the title, businesses usually track this over a time period of 5 years. You'll average out how much customers spend with you over 5 years.
LTV to CAC ratio
Your LTV to CAC ratio is an accurate measure of your company's ability to be profitable. Of course, you still have to keep your administrative costs in check.
Here's how to calculate this:
LTV ÷ CAC.
If your LTV is $500 and your CAC is $100, then your ratio is 5:1, and you have the ability to 5X your investments in customer acquisition.
ARPU
ARPU stands for average revenue per user. This is usually calculated from MRR but can also be calculated from ARR.
Here's how:
MRR ÷ number of users.
So if your MRR is $1,000,000 and you have 15,000 users, your ARPU is $66.67 per month.
Activation rate
The customer activation rate is an important metric to track when studying user adoption.
You can track the activation rate for different types of activation criteria as you experiment with your onboarding strategy.
Here's how:
(# of users who reached the point of activation in a time period ÷ number of users who signed up during that time period) x 100.
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