What is SaaS Growth Rate?

SaaS growth rate is a business metric used by SaaS companies to quantify how much a particular variable has increased or decreased relative to its baseline value. How it is calculated depends on the metric measured. In SaaS Capital’s survey of private B2B SaaS companies, the 2025 median growth rate was 22%.

The formula for calculating the SaaS growth rate depends on what metric you’re measuring. Here’s a breakdown of the general formula and some common SaaS metrics:

General Growth Rate Formula:

Growth Rate = [(Current Value – Previous Value) / Previous Value] * 100

Common SaaS Metrics and Their Growth Rate Formulas:

• Monthly Recurring Revenue (MRR) Growth Rate:

MRR represents the predictable and recurring income from monthly subscriptions.

MRR Growth Rate = [(Current Month MRR – Previous Month MRR) / Previous Month MRR] * 100

• Annual Recurring Revenue (ARR) Growth Rate:

ARR is the annualized value of your MRR, providing insight into the long-term health of your business.

ARR Growth Rate = [(Current Year ARR – Previous Year ARR) / Previous Year ARR] * 100

• Customer Churn Rate:

The churn rate measures the percentage of customers who cancel their subscriptions.

Churn Rate = (Number of Churned Customers / Total Number of Customers at the Start of the Period) * 100

• Customer Acquisition Cost (CAC) Growth Rate:

CAC is the average cost of acquiring a new customer.

CAC Growth Rate = [(Current Period CAC – Previous Period CAC) / Previous Period CAC] * 100

Growth rates are effective measures of economic well-being. They provide a method for quantifying alterations in an economic variable over an extended period, characterized by its relative ease of application. The benefits include:

• Understanding trends: Growth rates help in understanding the changing patterns of economic performance and discern what is working and what is not; lead velocity rate applies the same calculation to qualified leads, ahead of revenue.
• Benchmarking: They enable inter-industry and inter-country comparisons that are useful for benchmarking and competitive analysis. SaaS Capital’s 2026 benchmarks, from over 1,000 private B2B SaaS companies, rate the 2025 median at 22%: 20% for bootstrapped, 25% for equity-backed companies.
• Investor appeal: High growth rates are attractive to investors.
• Identifying areas for improvement: Growth rates can pinpoint specific areas of the business that are excelling or need attention, which affect your SaaS growth strategy.

Simple growth is calculated on the starting value only; compound growth is calculated on the accumulated value.

• Simple growth: While it is simple to calculate and understand, it is applicable for short-term financial scenarios, having a limited scope.
• Compound growth: This is the process of reinvesting profits, potentially generating further returns, but it requires a more complex calculation methodology.

A growth rate calculator is a tool employing mathematical and statistical frameworks to analyze data and offer financial projections. These tools are practical and represent a business asset in predicting trends as long as the calculation model and data used are reliable and accurate.

CAGR, or the compound annual growth rate, is a rate that is generally used to determine the annual compound growth rate of an investment across a period of time. This ratio will show a steady annual value. This is a better metric than arithmetic averages of growth.

CAGR is especially helpful when comparing how quickly an investment is growing during a specified time frame or when comparing similar competitors in the same industry. Market analysts also use CAGR to measure SaaS market growth.

The formula used to calculate CAGR is: CAGR = [(Ending Value / Beginning Value) ^ (1 / Number of Years)] – 1

*where:

The ending value represents the final value of the investment, whereas the beginning value is the initial value of the investment. The number of years represents the period measured.

Keep in mind that determining CAGR can be a complex process if the investment in question is subject to market volatility.

Negative growth, alternatively referred to as contraction, refers to a decrease in revenue over a set period. Flat or negative growth is uncommon: 7.3% of the private B2B SaaS companies SaaS Capital surveyed reported negative growth in 2025 (SaaS Capital). This contraction period can be explained by looking at several factors:

• High churn rates: When revenue is lost due to customers canceling their subscriptions is higher than the revenue gained from new and existing customers.
• Low acquisition rate: When a company fails to acquire new customers.
• Market contraction: When the demand for a SaaS product is low due to the shrinking of the market itself.