How to Evaluate SaaS Growth Metrics

ARR gets thrown around in every SaaS conversation 📊 But ask someone to explain why a 120% Net Revenue Retention rate makes investors salivate, and you'll get blank stares. Most people know the acronym. Few understand why it's the metric that determines whether you get funded or not. Annual Recurring Revenue represents the predictable revenue a company expects to receive annually from its subscription customers. It's the lifeblood of SaaS businesses and the key metric for measuring sustainable growth. ➡️ WHAT MAKES ARR SPECIAL ARR focuses on three core characteristics. Predictable revenue streams give you visibility into future cash flows. Recurring subscriptions create steady income you can count on. Most importantly, ARR excludes one time fees, giving you a clean view of your sustainable business foundation. ➡️ WHY INVESTORS GET EXCITED ABOUT ARR Four main reasons drive investor interest in your ARR metrics. Valuation becomes straightforward with predictable revenue. Higher ARR multiples translate directly to higher company valuations. Stickiness indicates customer loyalty and product market fit. When customers stick around, your business becomes more valuable and less risky. Predictability gives investors confidence in your business model. Recurring revenue provides visibility into future cash flows. Scalability shows potential for growth with existing customers. Each customer represents an opportunity to expand revenue without acquisition costs. ➡️ THE FOUR MOVEMENTS OF ARR Your ARR changes through four distinct customer behaviors each month. NEW subscribers bring fresh recurring revenue streams. This represents your acquisition engine working effectively. CHURN happens when customers cancel subscriptions entirely. You lose their complete recurring revenue contribution. EXPANSION occurs when customers upgrade plans, add users, or purchase additional features. This increases revenue per customer without acquisition costs. CONTRACTION takes place when customers downgrade plans or reduce usage. This decreases recurring revenue from existing relationships. ➡️ CALCULATING YOUR ARR GROWTH Opening ARR + New ARR - Churn ARR + Expansion ARR - Contraction ARR = Ending ARR Track these components monthly to understand your growth trajectory and identify improvement areas. ➡️ RELATED METRICS THAT MATTER Monthly Recurring Revenue provides granular tracking for short term trends. Net Revenue Retention measures revenue retained from existing customers over time. Customer Acquisition Cost shows how much you spend to acquire each new customer. Customer Lifetime Value represents total expected revenue from each customer relationship. ARR Multiple shows how SaaS companies typically trade in the market. === Understanding ARR gives you the foundation for building a strong SaaS financial model that investors will appreciate. What ARR challenges are you facing in your business? Join the discussion below 👇

Imagine this. You're sitting in the next board meeting. Revenue looks flat. CAC is climbing. New logo sales are slower than forecast. Everyone turns to you, the CFO. “What’s our plan?” If you don’t have a Net Revenue Retention (NRR) story to tell... You don’t have a story at all. In SaaS, NRR isn’t just a metric. It’s a reflection of how resilient, or fragile, your business really is. → It tells you how much your customers love you. → It shows whether your revenue grows on its own, or if you're trapped on the acquisition treadmill. → It decides if you’re compounding value... or quietly bleeding out. Where does your NRR stand? → < 100% ➔ You’re losing ground. Churn is eating your future. → 100–120% ➔ You’re stable, but expansion isn't pulling its weight yet. → 120%+ ➔ You’re riding a compounding machine. The valuation premiums start here. If you want to move NRR, you need to think like a strategist, not just a scorekeeper. Here is how 👇🏻 1. Expansion-first mindset: ↳ Upsells and cross-sells should be built into the customer journey, not bolted on later. 2. Churn risk radar: ↳ Low usage, late payments, silent accounts, spot them early. Silent customers are halfway out the door. 3. Pricing and packaging that invite upgrades: ↳ Make it easier to buy more, without heavy-handed sales. 4. Customer success as a revenue engine: ↳ Not just a support function. The best Success teams drive expansions without needing a quota. 5. Cohort deep dives: ↳ Not all customers expand equally. Find your power users and clone them. Why this matters even more now? It’s 5x cheaper to expand an existing customer than to acquire a new one. Every 1% improvement in NRR can lift your valuation by 15–20% over five years. High NRR buys you resilience when markets turn, and leverage when opportunities come. We all know the era of “growth at all costs” is dead. NRR-led growth is how you build a durable SaaS business. PS: How aggressively are you planning to move your NRR this year? Because if it's not on your agenda, it's definitely on your competitor's. ♻️ Share this to a finance leader who has outgrown their spreadsheets 🔔 Follow Mariya Valeva for more SaaS finance insights ➡️ And check out Subscript if you’re done paying the hidden tax of manual finance #SubscriptCFOPartner

🏊♂️ SaaS executives I meet are drowning in quarterly metrics reports, lacking actionable insights and taking a lot of time. My blueprint streamlines leadership meetings by prioritizing data-driven diagnosis and comparison to benchmarks for your scale. ⏸ Stop the data overload! Most SaaS leaders struggle with a flood of metrics each quarter. My framework cuts through the noise by: 🌍 Guiding you to the industry benchmarks relevant to your company's stage. 🆘 Helping you identify 3-4 key metrics that truly reflect your company's health. 👓 This laser focus lets you have more productive leadership meetings, prioritizing data-driven diagnosis over raw numbers. Example: 👉 Early-stage Company. Below $10M ❓ Question1: Are you retaining your revenue? 🔘 Metric: Gross Revenue Retention (GRR) 🎚 Benchmark: 80% to 90% ❓ Question 2: Are you closing a high % of sales opportunities? 🔘 Metric: Win Rate 🎚 Benchmark: 20% to 40% ❓ Question 3: Are your customers Satisfied? 🔘 Metric: NPS or Customer Satisfaction Score 🎚 Benchmark NPs: 30 to 50 Satisfaction: 70% to 80% ❓ Question 4: Driving growth from existing customers? Metric: New and Existing Annual Recurring Revenue (ARR) 🎚 Benchmark: 92% to 112% The most significant contribution of my work is the development of a diagnostic tool. This tool allows for a precise identification of the key areas where these benchmarks can be enhanced.

Most SaaS founders chase revenue, but the real problem is what they’re not tracking. They focus on: - Sales - Scaling - Signups But behind the scenes, pricing leaks are quietly draining profits. A small tweak in pricing could 2x retention. But without the right metrics, they never see the problem. Pricing isn’t just a number, it’s a growth engine hiding in plain sight. Here’s what you should be measuring: → LTV → CAC → NRR → MRR → ARR → ARPU → Churn Rate → Price Sensitivity → Discount Impact → Expansion Revenue SaaS growth isn’t just about more customers, It’s about pricing them right. P.S. Which pricing metric has made the biggest impact on your SaaS growth? ♻️ If you find value, let others benefit too. __________________________________________ Ready for more SaaS pricing insights? Follow me, Marcos Rivera🔔