What is Average Revenue Growth in SaaS?
Average Revenue Growth is a key SaaS metric that measures the rate at which a company’s revenue increases over a specific period, typically expressed as a percentage.
It helps SaaS businesses understand how fast their recurring revenue is growing on average, providing insights into overall business performance and scalability.
Why Does Average Revenue Growth Matter for SaaS Companies?
Average Revenue Growth is important because it:
- Indicates business expansion and market traction
- Helps in revenue forecasting and financial planning
- Provides insights into sales and marketing effectiveness
- Supports investor reporting and benchmarking
- Highlights long-term sustainability and growth potential
High average revenue growth suggests successful customer acquisition, retention, and upsell strategies.
How is Average Revenue Growth Calculated?
The formula for Average Revenue Growth is:
Example:
- Revenue at the start of Q1: $500,000
- Revenue at the end of Q1: $600,000
- Average Revenue Growth = (($600,000 − $500,000) ÷ $500,000) × 100 = 20%
For multiple periods, you can average growth rates across months or quarters to get the overall average revenue growth.
What Factors Influence Average Revenue Growth?
- Customer acquisition and onboarding
- Upsells and cross-sells (expansion revenue)
- Churn or cancellations reducing revenue
- Pricing changes or plan upgrades
- Market demand, seasonality, and economic factors
How Can SaaS Companies Improve Average Revenue Growth?
✅ Focus on acquiring new high-value customers
✅ Implement upsell and cross-sell strategies
✅ Reduce churn with better onboarding and support
✅ Optimize pricing and subscription plans
✅ Expand into new markets or customer segments
What Are Common Mistakes in Tracking Average Revenue Growth?
🚫 Confusing ARR or MRR growth with total revenue growth
🚫 Ignoring churn and downgrades
🚫 Using inconsistent time periods
🚫 Not segmenting by product line or customer type
🚫 Over-reliance on averages without analyzing trends
Why Average Revenue Growth is Critical for SaaS Growth
- Performance Tracking: Shows business trajectory and momentum
- Investor Confidence: Key metric for funding and reporting
- Strategic Decisions: Guides product, pricing, and sales strategies
- Revenue Forecasting: Supports planning for scaling and investments
- Growth Benchmarking: Compares performance against industry standards
Related SaaS Terms
- ARR Growth Rate
- MRR Growth Rate
- Churn Rate
- ARPA (Average Revenue per Account)
- ARPU (Average Revenue per User)
In Summary
Average Revenue Growth measures the average pace at which a SaaS company’s revenue is increasing, offering insights into growth trends, financial health, and market performance.
Optimizing this metric helps drive sustainable revenue expansion and informs strategic business decisions.