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What Is a Good Monthly Growth Rate for SaaS Startups?

May 02 • 2 min read

Knowledge Base > SaaS > What Is a Good Monthly Growth Rate for SaaS Startups?

The ideal monthly growth rate for SaaS (Software as a Service) startups varies depending on various factors, such as the stage of the company, the target market, and the industry. However, in general, a good monthly growth rate for SaaS startups is around 10-20%.

In the early stages of a startup, the growth rate can be higher, sometimes even as high as 50% per month. However, as the company grows and matures, the growth rate usually slows down.

It’s important to note that a high growth rate doesn’t necessarily mean a healthy business. Startups need to focus on achieving sustainable growth, which means growing steadily while maintaining a healthy balance between customer acquisition costs and customer lifetime value.

Moreover, growth rates can vary significantly between different industries and types of SaaS products. For example, some niche products may have a slower growth rate, but a higher retention rate, leading to better long-term growth. Therefore, it’s essential to compare the growth rate of a SaaS startup with industry benchmarks and take into account the specific characteristics of the product and market.

SaaS businesses with a good monthly recurring revenue (MRR) are generally more appealing to investors because it demonstrates a predictable and stable revenue stream. Investors are typically looking for businesses that can provide a steady return on their investment over time, and a strong MRR can indicate that a business has a reliable customer base and a product that is in high demand. Additionally, a strong MRR can help a business to weather any short-term fluctuations in revenue, which can make it a more attractive investment opportunity.

To calculate the net monthly recurring revenue (MRR) growth rate, you can follow these steps:

  1. Calculate the MRR at the beginning of the month (BMRR) and the MRR at the end of the month (EMRR).
  2. Subtract the BMRR from the EMRR to find the net MRR growth for the month.
  3. Divide the net MRR growth by the BMRR to get the MRR growth rate as a percentage.

Here’s the formula:

MRR Growth Rate = ((EMRR – BMRR) / BMRR) x 100

For example, if the BMRR is $50,000 and the EMRR is $60,000, the net MRR growth for the month is $10,000. To find the MRR growth rate, you would divide $10,000 by $50,000 and then multiply by 100 to get a growth rate of 20%.

Useful Links:

  1. What Is a Good Monthly Growth Rate for SaaS Startups?
  2. Average SaaS Growth Rate: Brief Guide for Startups

 

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Common Questions

  • What is a good monthly growth rate for a SaaS startup?

    In general, a good monthly growth rate for SaaS startups is around 10-20%. However, this can vary depending on factors such as the stage of the company, the target market, and the industry.

  • Is a higher growth rate always better for a SaaS startup?

    Not necessarily. While high growth rates can be impressive, it’s important to focus on achieving sustainable growth. This means growing steadily while maintaining a healthy balance between customer acquisition costs and customer lifetime value.

  • How can I benchmark my SaaS startup's growth rate against the industry?

    You can research industry benchmarks for your specific niche or type of SaaS product. This will give you a better idea of how your growth rate compares to others in the same market.

  • Should I expect my SaaS startup's growth rate to slow down over time?

    Yes, as a SaaS startup grows and matures, the growth rate typically slows down. This is natural and expected, but it’s important to focus on achieving sustainable growth.

  • Can a slow growth rate be a good thing for a SaaS startup?

    Yes, sometimes a slow growth rate can be a good thing. For example, some niche products may have a slower growth rate, but a higher retention rate, leading to better long-term growth.

  • How can I improve my SaaS startup's growth rate?

    There are many ways to improve your SaaS startup’s growth rate, such as optimizing your marketing and sales processes, improving your product, and expanding into new markets. It’s important to experiment with different strategies and track their impact on your growth rate.

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