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TG3 SaaS/Glossary/ARR growth rate
SaaS metrics glossary

What is ARR growth rate?

ARR growth rate is the single number investors check first. It tells you how fast your recurring revenue is compounding and whether the curve is bending up or flattening out.

Definition
ARR growth rate is the percentage change in annual recurring revenue across a set period, usually a year. Grow from $4M to $6M ARR and your annual growth rate is 50%. It strips out one-off revenue and measures only the recurring base that funds the next round.

It is the metric every term sheet hinges on. Two companies at the same ARR are worth very different multiples if one is growing 120% and the other 30%. Growth rate also decays predictably as you scale, so the bar shifts. 100% growth at $1M ARR is ordinary. 100% at $20M ARR is rare.

How to calculate it

How to calculate ARR growth rate.

ARR growth rate = (ending ARR minus starting ARR) / starting ARR x 100
Ending ARR: recurring revenue run rate at the end of the period.
Starting ARR: recurring revenue run rate at the start.
Period: usually 12 months for annual growth, sometimes a quarter annualised.

Run your own numbers with the free ARR growth rate calculator. Drop in two ARR figures and it returns the rate plus the implied doubling time.

Benchmarks

What a healthy ARR growth rate looks like.

The benchmark moves with scale. Below $1M ARR, triple-digit growth is common because the base is tiny. Between $1M and $10M, the T2D3 path (triple, triple, double, double, double) is the venture-backed standard. Past $10M, sustained growth above 60% puts you in the top decile.

Efficiency matters as much as the rate now. A 2026 investor discounts fast growth bought with a burn multiple above 2. The prize is growth that holds its rate while net revenue retention carries a chunk of it, because expansion revenue is cheaper than new logos.

How to improve it

Three levers that lift ARR growth rate.

01

Defend the base first

Every point of churn is a point you have to re-earn before you grow. Cutting gross churn from 2% to 1% monthly does more for the rate than a new acquisition channel and it costs less.

02

Make expansion the engine

Net revenue retention above 110% means the existing base grows on its own. That is compounding you do not pay CAC for and it is the cleanest way to hold a high rate as you scale.

03

Shorten the sales cycle

Faster deals mean more bookings land inside the period. Tightening a 110-day cycle to 80 pulls revenue forward and lifts the rate without adding a single rep.

Common questions

Questions about ARR growth rate.

How do you calculate ARR growth rate?+

Subtract starting ARR from ending ARR, divide by starting ARR and multiply by 100. Go from $4M to $6M in a year and that is (6 minus 4) / 4 x 100 or 50% annual growth.

What is a good ARR growth rate?+

It depends on scale. Under $1M ARR, expect triple digits. Between $1M and $10M the venture standard is roughly doubling each year. Past $10M ARR, holding above 60% lands you in the top tier.

What is the difference between ARR growth rate and MRR growth rate?+

They measure the same thing on different clocks. MRR growth is monthly and noisier. ARR growth annualises the run rate and smooths the noise, which is why boards and investors track ARR.

Does ARR growth rate include expansion revenue?+

Yes. ARR growth captures the net movement of the recurring base, so expansion and contraction both count. A high rate driven by expansion is healthier than one driven only by new logos.

How fast does ARR growth rate decay?+

Predictably. Most SaaS companies see the rate roughly halve every couple of years as the base grows. Planning for that decay is how you set targets your team can actually hit.

ARR growth rate calculatorAnnual recurring revenueRule of 40All definitions

Growth rate flattening out?

If the curve is bending the wrong way, the fix is usually in retention or cycle time, not a new channel. Book a 30-minute audit and we will find where the rate is leaking. No sales sequence.

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