Average SaaS Growth Rate: Brief Guide for Startups

You have no doubts – your startup is born to be successful.

You want it to grow fast, but what does this "fast" mean? And how can you understand your company is on track? Among various business metrics, there is one that should always be top of mind. In this article, you will learn about the growth rate and how to use this indicator to measure your business results.

What is the SaaS growth rate?

The SaaS revenue growth rate shows how fast your company’s income is increasing over time. For startups, it’s one of the most critical metrics because it reflects your ability to scale and survive.

If you’re growing fast, it likely means:

• You’ve found product-market fit.
• Users are willing to pay, not just try.
• Your go-to-market strategy is working.
• You have a shot at raising capital and scaling further.

If your revenue growth slows or stagnates:

• You may be hitting a market ceiling.
• You could be facing churn issues or pricing problems.
• Investors might start asking tough questions.

The fact is that consistent and compounding growth is the most powerful proof that your project has traction and, ultimately, potential. That’s why the startup growth rate is the first number VCs want to see. It answers the unspoken question: Are you building something that people want and are willing to pay for, repeatedly?

Paul Graham, co-founder of Y Combinator, puts it this way:

“If there’s one number every founder should always know, it’s the company’s growth rate. That’s the measure of a startup. If you don’t know that number, you don’t even know if you’re doing well or badly…”

Understanding the SaaS growth opportunities is crucial for the company registration process, as it helps assess the business’s viability. This knowledge will help you:

• To ensure funding from investors, who look at this metric to evaluate a startup’s promise.
• To develop and quickly adjust operational plans based on weekly, monthly, or longer-term growth rate trends.
• To determine how to allocate resources wisely depending on whether the business grows fast or slows down.

How to calculate revenue growth rate

While a number of options exist to calculate the growth rate of SaaS companies, I would recommend keeping things simple.

Here is the basic formula to calculate the monthly growth rate:

(Second Month Revenue – First Month Revenue) / First Month Revenue * 100 = % Revenue Growth Rate

For example, if the first month you got $1000 revenue and $2500 the second month, your growth rate made up 150%.

($2500 - $1000) / $1000 * 100 = 150%

This way, you can know your revenue growth using actual data. If you want to make future revenue estimations, you will need to build a financial forecast, starting with planning your company's expenses. When your business is in the startup stage, forecasting expenses is usually much easier than revenues.

We will come back to the revenue forecast a bit later.

Before that, let's get to know how fast SaaS companies usually grow.

SaaS growth benchmarks in 2025

The studies we gonna explore below focus on annual revenue growth for a reason. Monthly recurring revenue (MRR) growth can be deceptive for early-stage startups. Initial exponential growth rates — sometimes exceeding 150% — are common in the early months. 

However, as the company matures, growth rates typically decline. To gain an accurate picture of your SaaS growth trajectory, it’s advisable to analyze trends over a 12–18 month period.​

Paul Graham of Y Combinator, whose words we cited at the beginning, has a different view. He suggests that startups should aim for 10% weekly growth in their early stages to achieve rapid scaling. While this is an aggressive target, it sets a benchmark for ambitious growth.

What is a good growth rate for a startup?

In 2025, SaaS growth rates continue to vary significantly based on company size, funding status, and market focus. According to SaaS Capital’s recent benchmarks, bootstrapped SaaS companies report a median annual growth rate of 23%, while venture-backed counterparts see a slightly higher median of 25% .​

Notably, smaller SaaS companies with Annual Recurring Revenue (ARR) under $1 million often experience higher growth rates, sometimes exceeding 50%, due to their agility and niche market targeting. Conversely, larger firms with ARR above $20 million typically see growth rates around 27%, reflecting market saturation and scaling challenges.

What else influences SaaS growth?

When analyzing B2B SaaS growth benchmarks, numbers alone don’t tell the whole story. Context matters a lot. Growth rates also vary by how long a company has been in business, how well it retains its customers, and how solid its foundation is from day one.

Let’s break down some of these growth-shaping factors.

1. Growth slows with age, and that’s normal.

As stated by SaaS Capital, younger companies, especially those under 12 years old, often grow significantly faster than their older counterparts. Once a company hits that 13+ year mark, its growth rate usually stabilizes around 20% per year.

It’s not a failure. It’s the natural evolution of product-market saturation, operational complexity, and increasing market competition. In fact, slower but more predictable growth is often a sign that a SaaS company has entered a mature, sustainable phase.

2. High retention fuels sustainable growth.

Behind every breakout startup is a loyal customer base. In fact, net revenue retention (NRR) is one of the most powerful indicators of long-term success.

Here’s what the data shows:

• SaaS companies with NRR above 110% have median growth rates exceeding 60%.
• In contrast, companies with NRR below 100% grow at a much slower median rate of just 30%.

This gap highlights the compounding effect of retention: keeping customers happy and expanding their value over time drives growth more reliably than acquisition alone.

3. It takes five years to hit $1M ARR.

If your startup hasn’t crossed $1 million ARR yet, don’t panic, you’re not behind. On average, SaaS companies take around five years to reach that milestone. This metric is crucial because it sets realistic expectations.

Rather than fixating on unicorn-like overnight growth, early-stage teams should focus on building a solid foundation: nailing product-market fit, refining onboarding, improving retention, and slowly but surely climbing the revenue ladder.

What does this mean for your startup?

So, we’ve just walked through a whirlwind of insights and statistics (hopefully your head isn’t spinning, ours kind of is). Now, let’s take a step back and talk about what all this really means for you.

→ If your startup is growing fast — great! Don’t let the momentum go to waste. Double down on customer retention, because that’s what will keep your growth sustainable.

→ If things are moving more slowly, don’t stress. Use this time to get closer to your users. Understand their needs better, improve your product, and work on boosting your NRR.

→ If you’re early in the game — sub-$1M ARR — be patient. Focus on product-market fit and benchmark your progress against startups at the same stage, not the giants.

The importance of the SaaS Rule of 40

Now that we’ve explored growth rates, retention, and ARR milestones, let’s talk about a metric that helps SaaS companies evaluate whether they’re growing efficiently: the Rule of 40.

The Rule of 40 says that your company’s growth rate + profit margin should add up to at least 40%. It’s a popular benchmark among investors, especially for more mature SaaS businesses, and it helps balance the trade-off between burning cash to grow and building a sustainable business.

So if your company is growing at 60% but burning -20% in margin, you’re still in the healthy zone. But if you’re growing at just 15%, you’ll want a healthy profit margin to make up the difference.

It’s not something you need to obsess over in your early days, but it’s good to know where you’re heading.

How fast can a startup grow?

There’s no exact answer. But we do want to stress that some startups really do grow like rockets.

In the early days, especially right after product-market fit clicks, SaaS companies can experience growth rates that seem unreal: 150%, 300%, even 500% year-over-year. These cases often go viral or tap into deep market pain.

But here’s the thing: those spikes rarely last forever.

The startup growth curve often follows a pattern — explosive at first, then tapering as the company scales. Growth naturally slows as you move into new phases of hiring, infrastructure, and churn management. That’s why it’s important not to just chase the fastest growth, but the healthiest one for your stage.

So, how fast can you grow? As fast as your product solves a real problem, and your team can keep up.

How to forecast revenue growth

Now we’ve arrived at the part we mentioned right at the beginning — building a solid financial forecast. At the startup stage, planning your revenue and expenses is just as crucial (if not more) than making your first sales.

If you want to get funded, few investors will take a risk and put money in your business unless you persuade them by thorough planning and thoughtful forecasts.

Also, accurate projections will help you develop reasonable operational and staffing strategies, which are essential business success components.

Here are three pieces of advice you may find useful when building your financial forecasts from the ground up.

1. Start with expenses

To accurately estimate your SaaS company’s growth rate, list the most common expenses, and think about how much money they will “eat” from your budget.

For example, it can be something like that:

• Office rent;
• Utility bills;
• Accounting & Legal fees;
• Advertising & Marketing;
• Salaries.

These are the most typical fixed costs. On top, you will more likely have some variable expenses depending on your business specifics. Add them to your estimation as well.

It will be smart to double initial assumptions for advertising and marketing, as they always go beyond expectations. Also, keep some extra budget for just in case. You never know what can happen, so a money reserve wouldn’t hurt.

2. Think both conservatively and aggressively

If you want to grow big, think big!

Don’t worry. Your most aggressive dreams will be balanced with the conservative reality. However, to be ready for both “reasonable” and “ambitious” scenarios, spend time creating two sets of revenue forecasts.

For instance, your conservative plan may look like this one:

• One product or service a year;
• Low price point;
• One marketing channel;
• No sales staff.

And your aggressive dreams will include:

• One product or service introduced in the first year, and three more products for different market segments during the next three to four years.
• Low price for the basic plan and higher price for the premium.
• Two to three marketing channels managed by a dedicated marketing manager.
• Several salespeople working with the leads.

3. Mind your margin

And finally, we came to the margin, the result of all the company’s efforts.

When you set a desirable margin level, you may find that your aggressive assumptions become unrealistic. And this is OK. The final goal of each business is to make a profit. Even if you can’t realize your ambitious dreams quickly, but your margin is thick, you are on the right path.

You should always target an increasing margin trend. Even though many entrepreneurs balance on the break-even point with the hope of improving their balance sheet later, let’s be prudent.

Is the SaaS industry growing? Wrapping up 2024 growth trends

The SaaS revenue growth rate is a crucial metric to monitor, reflecting a company’s sustainability and profitability. Startups often see rapid early-stage growth, with average ARR growth of 144%, but as companies mature, this typically slows to 15%–45% year-on-year. Early-stage companies can track a 12–18 month trend or target a 10% weekly growth for faster expansion.

So what should you take from all this?

Growth alone doesn’t tell the whole story. What really matters is how predictable, sustainable, and strategically guided that growth is.

And if you’re still wondering how to turn your growth into long-term traction, that’s where we come in. At Eleken, we help SaaS startups design smarter, faster, and more user-centered products. Ones that don’t just attract customers — they keep them.

Now that you understand the fundamentals of revenue growth, go deeper. Learn about the other side of the equation — SaaS churn rate — and how to make sure your users stay for the long haul.