Metric Stack - SaaS Growth Metrics and more!

First Edition: ARR Growth Benchmark, Top SaaS Growth Metrics, MetricHQ

Welcome to the first ever edition of Metric Stack! I’m Priyaanka Arora, Content Researcher & Writer at Klipfolio, and your personal metric assistant. Together, we’ll go on a journey of discovering SaaS through metrics, benchmarks, and expert-curated content.

Let’s begin: what is ARR Growth Rate?

As a refresher of one of the most fundamental SaaS metrics, Annual Recurring Revenue (ARR) totals all recurring revenue you earn from existing subscriptions as an annual value. So if your customer pays you $1,000 every month or signs a $12,000 contract for one year, you have an ARR of $12,000. But if that customer pays you a one-time fee of $1,000 then your ARR is $0: only recurring revenue counts towards ARR.

Naturally, you want ARR to grow over time. Here’s an interesting statistic: as a SaaS company, your growth rates are fairly predictable. The median growth rate for SaaS companies ranges between 75-85% of the previous year’s growth. Read this amazing study of the persistence and predictability of SaaS growth rates by Christoph Janz.

Coming to our key metric, ARR Growth Rate is the percentage change in ARR over a given period. Here’s the formula:

( ARR end of period / ARR beginning of period ) - 1, expressed as a percentage.

So what’s the ARR Growth Rate Benchmark?

The median annual growth rate for companies making less than $1 million ARR is 100%. This growth rate increases to as much as 175% for the top 25% of companies making less than $1 million annually.

Of course, this growth rate decreases significantly with increased ARR. That doesn’t mean your growth should stop. Remember, we saw that SaaS growth rates stay persistent and predictable. Take a look at the graph below to find the median ARR Growth Rate for your company's ARR Scale:

I recommend you read the 2020 Expansion SaaS Benchmarks study by OpenView for the full picture and other key SaaS metric benchmarks.

So, where do you stand in comparison to this benchmark? Keep in mind that while ARR Growth Rate is one metric that matters, there are other indicators of success that you should consider as well. I'll talk in-depth about one such metric, the Bessemer Efficiency Score, in the next edition of Metric Stack Newsletter.

Discover More Metrics on MetricHQ

That’s right, we’re THE HQ for metrics! On MetricHQ, 50,000 monthly readers trust us as the definitive source for all things metrics and KPIs across popular topics such as SaaS, Finance, and Marketing. 

Just like this newsletter, MetricHQ is all about discussion and collaboration. Many of our expert readers regularly contribute their expertise through authoring metric definitions or reviewing and sharing insights with us. Sounds like something you'd like to do too? Here's where you can contribute your metrics!

What’s new on MetricHQ

You might like reading about these other SaaS growth metrics on MetricHQ: ACV Growth Rate, DAU Growth Rate, and Bessemer Efficiency Score if you want to read ahead on what’s coming next in the newsletter. You can always discover more metrics that measure and impact success from this collection of 50+ SaaS metrics.

Fun with metrics - SaaS industry growth statistics:

I’ll leave you with some fun yet astonishing global SaaS growth statistics to complement what we’ve discussed today (compiled by 99 Firms).

• The total size of the public SaaS market was $141 billion in 2019 and is estimated to have grown to $157 billion in 2020.

• 89% of SaaS businesses focus on new customer acquisition strategy as a priority growth activity.

• 80% of businesses use at least one SaaS app while 73% use exclusively SaaS apps by 2020.

• SaaS in the healthcare industry is growing by 20% yearly and is projected to hit $51.9 billion by 2024.

Stay tuned for the next edition of Metric Stack Newsletter to get the latest scoop on all things metrics! Send feedback, comments, questions here: parora@klipfolio.com