The technology sector has had a turbulent few years. Amongst the turbulence, McKinsey estimate that the global SaaS market will continue to grow, from an estimated $3 trillion, to $10 trillion by 2030.  

A recent report by Chart Mogul (a subscription analytics platform) offered a number of insights and benchmarks for SaaS companies. We found the following take-outs of interest:

1. SaaS revenue growth rates, which progressively declined since the peak in Q1 2021, stabilised during 2023.  This is supported by data from the SaaS Capital Index:
   • For top decile SaaS companies, annual recurring revenue (ARR) continues to double each year.  Top decile companies with:
     • $1-3m of ARR have annual growth rates of 192%
     • $3-8m of ARR have annual growth rates of 121%; 
     • $8-15m of ARR have annual growth rates of 110%; and
     • $15-30m of ARR have annual growth rates of 103%.
   • For the top quartile SaaS companies, ARR growth has been around 50-70% each year.  Top quartile companies with:
     • $1-3m of ARR have annual growth rates of 70%
     • $3-8m of ARR have annual growth rates of 63%; 
     • $8-15m of ARR have annual growth rates of 48%; and
     • $15-30m of ARR have annual growth rates of 60%.
   • On a monthly basis, top decile SaaS companies grow around 7-10% each month, whereas the top quartile SaaS companies see growth around 5-7% each month.
2. New logo (ie new customer) acquisition has increased in 2023. The vast majority of SaaS companies with >$10m ARR increase ARR by growing their subscriber base, whereas <5% of SaaS companies grew predominately by increasing their average revenue per user.
3. SaaS companies with >$5m in ARR rely on expansion revenue to aid growth. Within this segment, companies with higher revenue per user are able to upsell and cross-sell more efficiently, meaning a higher proportion of new revenue can be derived from expansion.
4. Retention can be a growth driver.  As companies continue to review their tech stacks and complete ‘cost-out’ exercises, we are seeing lower customer retention rates than during the 2020 period.  However, SaaS companies with net revenue retention rates >100% grew by 54%, whereas SaaS companies with net revenue retention rates around 60% to 80% grew by just 12%.  It’s worth noting that this does not apply to B2C companies which generally see higher churn, offset in part by larger markets.
5. Reactivations can be a growth driver.  Top quartile SaaS companies reactivate nearly a quarter of their churned customers.  Having efficient reactivation campaigns can yield strong results, as these customers tend to have a lower cost to re-acquire, as customers are familiar with the offering.