What is Revenue Growth Rate?

Revenue Growth Rate is the percentage of customers who stop doing business with a company over a certain period of time.

How is Revenue Growth Rate calculated?

It is calculated by dividing the revenue for the current period by the revenue from the prior period and then subtracting 1.  For example, if a company had revenue of $100,000 in 2020 and $120,000 in 2021, its Revenue Growth Rate would be calculated as follows:

(120,000 / 100,000) – 1 = 0.2 = 20% Revenue Growth Rate

When revenue is calculated over a quarter, it is typical to multiply by four to get an annual figure.

revenue growth rate formula

How is Revenue Growth Rate used by SaaS companies?

Revenue Growth Rate is a key performance indicator (KPI) for most SaaS companies. It is important for these companies to maintain a high Revenue Growth Rate in order to attract investors and build market share.

Many SaaS companies will specifically analyse MRR Growth Rate (or monthly recurring revenue growth rate).

What is the difference between recurring and non-recurring revenue?

Recurring revenue is revenue that is expected to be received on a regular basis, such as monthly or annually. This type of revenue is often seen as more predictable and stable than non-recurring revenue, which is revenue that is received on a one-time basis.
 

What is a good Revenue Growth Rate?

A good Revenue Growth Rate ultimately depends on the specific circumstances of the company. However, a high Revenue Growth Rate is generally seen as a positive indicator for a company’s financial health.

What are the Revenue Growth Rate benchmarks?

Revenue Growth Rates vary widely depending on the industry, the size of the company, and other factors. It is important for a company to compare its Revenue Growth Rate to its own past performance and to the performance of its competitors in order to get a sense of how it is doing.

SaaS companies benchmark MRR Growth Rate.  The most useful benchmarks are those which consider both the size of the SaaS business as well as their target customers.  Our benchmarking article provides details on both.

Revenue Growth Rate visualization example

This chart is an example of customer churn rate, with year on year comparisons, making it much easier to understand trends, improvements, even seasonality.
revenue growth rate graph

ScaleXP fully automates revenue growth rate calculations and MRR growth rate. Through integrations with both your accounting and CRM systems, as well as a smart set of text recognition algorithms, the system provides a full suite of SaaS metrics.