Metrics Benchmark Report


Two questions we frequently hear from customers are:

  • “What does a healthy SaaS company look like?”
  • “Which metrics should we look at to determine whether or not our company is doing well?”

We wanted to share our answers to these questions to help more startups understand the anatomy of a healthy SaaS company.

In addition to the experience we’ve gained by helping hundreds of SaaS companies, we gathered some of the most popular SaaS benchmark reports in the industry. The result was a list of trends and metrics that VCs and experts use to benchmark companies.

While there was a lot of great data, we noticed a few issues:

  • There are a ton of reports
  • The reports didn’t include all the same metrics
  • Many of the reports didn’t contextualize the data

All of which underscored the need to pull this report together to help you understand what healthy SaaS companies look like today.

Specifically, this report analyzes data across thousands of venture-backed SaaS companies.

After analyzing the benchmarks, we uncovered nine key growth trends for SaaS companies related to customer acquisition, hiring, growth efficiency, and more.

Read on to see our complete analysis and benchmarks.

How Do You Measure Growth?

Before we dive into our analysis, it’s important to understand how SaaS companies measure success.

SaaS companies can track a seemingly endless list of metrics to measure their progress. But at the end of the day, most of it boils down to one word—growth.

Is your company growing, declining, or at a standstill? That’s the question VCs want to know. It’s the question that keeps founders up at night. The question will ultimately decide whether your company succeeds or fails.

However, there’s more than one way to measure growth. While ARR growth is the top-level metric for many SaaS companies, it’s only the tip of the iceberg.

Think of your startup like a person going to the doctor for a physical exam. There are a lot of markers of a healthy person—blood pressure, weight, cholesterol, etc. Your blood pressure could be great, but if your cholesterol and glucose levels aren’t in healthy ranges, it’s a sign of an issue you need to address.

Startups function the same way. You may have a fantastic revenue growth rate, but what if your burn rate is too high? What if your customer acquisition costs are unsustainable?

Due to the current economic uncertainty, startups are under more pressure to grow efficiently and build healthy businesses. Those are the businesses that will weather the storm and get VC funding.

To become one of those companies, you need to measure the totality of your startup’s health.

This guide will help you choose which metrics to measure and gauge whether or not your numbers are in a “healthy” range.

How to Interpret The Benchmarks

We calculated the benchmarks for this report by averaging data across seven trusted data sources.

To help you understand how you stack up against similar companies, we’ve grouped the majority of the benchmarks by ARR:

  • Less than $2.5M
  • $2.5-10M
  • $10-25M
  • $25-50M
  • $50-100M
  • $100-250M
  • $250M+

Keep in mind that these are simply benchmarks. If one of your metrics doesn’t align with the numbers in our report, it doesn’t necessarily mean you’re underperforming.

However, if you notice one of your metrics is far below the benchmarks for companies in your revenue range and negatively impacts your business, consider making a goal to improve it.

You can find definitions and the complete list of benchmarks in the appendix section of this guide.

Key Findings

1. Invest in Product First, Then Sales & Marketing

One of the biggest mistakes you can make as an early-stage SaaS company is investing heavily into sales and marketing before establishing product-market fit.

So it’s no surprise that we see the majority of SaaS companies invest most of their money into product development before raising a Series A round. The median R&D spend as a percentage of revenue was 40% for angel/seed round stage SaaS companies.

research and development spend benchmarks

Without establishing product market fit, you’re taking a bigger gamble with the money you spend on sales and marketing.

This doesn’t mean you need to perfect your product before raising your Series A round or investing in sales and marketing. However, you should, at the very least, have a working version of your product and know who your target market is.

2. Invest in Sales & Marketing After Your Series A

Once you’ve raised a Series A round and are ready to focus on revenue growth, what should be your next priority? According to our analysis, investing in sales and marketing is a wise choice.

The median sales and marketing spend as a percentage of revenue is 28% pre-Series A. Once companies have raised their Series A, that number jumps to 33% and continues to increase.

sales and marketing spend benchmarks

Now, let’s compare that chart to the benchmarks for average revenue per employee.

revenue per employee benchmarks

The median revenue per employee starts at $43K for companies generating less than $2.5M of ARR. For companies in the $2.5-10M cohort, the median revenue per employee increases to $104K.

In our experience, this is often around the time when startups are in their Series A stage. As noted above, that’s when most startups invest in sales and marketing.

Since sales and marketing people are hired to generate revenue, they likely play a significant role in the increase in revenue per employee in the chart above.

Once you’ve established product-market fit (and continue to improve your product), the investments you make in sales and marketing can create a snowball effect and become a growth engine to reach your next milestone (fundraising, revenue, etc.)

3. CAC Payback Periods Increase As You Scale

Many B2B SaaS companies start by selling to the SMB market. Over time, they go upmarket and target enterprise companies.

Targeting larger companies typically means longer sales cycles and higher customer acquisition costs. According to our analysis, this results in longer CAC payback periods.


cac payback period benchmarks

Average CAC payback periods start relatively short for SaaS companies generating less than $2.5M of ARR (around 12 months).

When SaaS companies reach $50-100M of ARR, the median CAC payback period nearly doubles to 21 months.

The takeaway is you shouldn’t be alarmed if your payback period starts to increase as your revenue grows—it’s normal.

4. How Much Should You Spend On Customer Acquisition?

Metrics like CAC payback period and the Magic Number help you gauge how efficiently you acquire customers.

However, one important piece of the customer acquisition puzzle is cost. Spending too much money to acquire customers will extend your CAC payback period and lower your Magic Number. A quick way to determine whether or not you’re overspending is to use the “OG” metric, LTV/CAC ratio.

Here are some benchmarks to compare.

ltv cac ratio benchmarks

The generally agreed-upon best practice for SaaS companies is to aim for an LTV/CAC ratio of 3:1. According to the data, the average startup has an LTV/CAC ratio between 3-5:1.

This means companies generate 3-5x more revenue from customers than it costs to acquire them.

5. Larger SaaS Companies Rely on Customer Retention & Expansion For Growth

Part of the reason larger SaaS companies can withstand a longer CAC payback period is that they’re able to retain and upsell customers better than their smaller counterparts.

As ARR increases, data shows that a higher percentage of new revenue comes from existing customers (expansion revenue) rather than new customers.

percentage of new arr from existing customers

The median percentage of new ARR from existing customers for startups generating $100-250M of ARR is 53% compared to 29% for startups generating less than $10M of ARR.

On average, SaaS companies generating over $25M of ARR attribute over 50% of new ARR to upgrades and upsells of existing customers.

We can also see the importance of expansion revenue in the net retention rate benchmarks.

On average, SaaS companies generating more than $2.5M or ARR have a net retention rate of over 100%. This means the ARR generated by upselling existing customers is greater than ARR lost to churn.

This could be for a variety of reasons.

In the early stages of a SaaS company, customer acquisition is often the key focus.

You’re getting new customers, constantly iterating your product roadmap, learning more about why customers stay or churn, and you have a better understanding of customers’ high-priority needs.

As you hit the growth stage and establish Product Market Fit (PMF), you better understand how to retain customers and have a larger existing customer base to upsell. In addition, you can create more sophisticated features, which allows you to increase your prices.

Based on the benchmarks above, most SaaS companies generate 40-50% of new ARR from their current customers.

If you’re early on, it’s not uncommon to be in the 10-30% range. But the goal should be to increase revenue from existing customers and net retention as much as possible, so you’re not solely reliant on new customer acquisition to fuel growth.

This is critical as you scale because it makes it easier to grow without relying on new customer acquisition.

That’s the perfect segue to our next takeaway.

6. Revenue Growth Returns Decay Over Time

In an ideal world, you’d be able to grow revenue exponentially yearly. However, our analysis shows that’s not the case for SaaS companies.

arr growth benchmarks

The median growth rate for SaaS companies generating less than $2.5M in revenue is 84%. Once startups reach $10-25M of ARR, the median growth rate drops to 47%.

We also see a steep dropoff when startups reach $100M of ARR.

According to the popular “triple, triple, double, double, double” (T2D3) growth path outlined by Battery Ventures Partner Neeraj Agrawal, this isn’t surprising.

Agrawal suggests that within five years after establishing PMF, revenue growth for venture-backed startups should look like this:

  • Triple revenue in each of the first two years
  • Double revenue in each of the subsequent three years

He proposed that after the T2D3 period, revenue growth begins to slow down.

In other words, your revenue is growing, but not at the rate it was in the earlier stages of your startup.

One metric that goes hand-in-hand with revenue retention is Growth Endurance—the rate at which you retain growth from one year to the next. Even though your growth rate may decay over time, you need to maintain as much revenue growth as you can each year to stay on a positive growth trajectory. Your growth endurance rate will help you monitor that.

To calculate your Growth Endurance rate, divide the current year’s growth rate by last year’s.

According to data from Bessemer Venture Partners, VC-backed SaaS companies should strive to retain at least 70% of their growth rate year over year (YoY).


growth endurance benchmarks

Bessemer’s research also noted that growth endurance is typically higher for public companies—around 80% compared to 70% for private companies.

The chart below illustrates how growth endurance impacts your company’s growth trajectory. It compares three scenarios of reaching $100M of ARR based on 70, 75, and 80% growth endurance:

bessemer ventures growth endurance chart

It takes a company with an 80% growth endurance rate half the amount of time to reach $100M of ARR as a company with a 70% endurance rate.

7. SaaS Companies Prioritize Growth Over Profitability Early On

Most VC-backed startups are familiar with the “Grow at all costs” concept.

Essentially, it’s the idea that startups will operate at a loss for some time to focus on growing their user base and revenue as fast as possible with the end goal of a successful exit (typically an acquisition or IPO).

Our analysis found that this is often the case, but startups tend to tighten up over time.

Looking at the benchmarks for free cash flow margins, we can see that most startups operate with significant negative margins early on.

free cash flow margin benchmarks

The median FCF margin for SaaS companies with less than $2.5M of ARR was -308%.

That number improves by nearly 50% for companies generating $2.5-10M of ARR, but it’s still at -175%.

SaaS companies can often sustain a low FCF margin in the early days because investors understand they’re in the process of figuring things out—from optimizing operating costs to managing expenses.

As you can see from the benchmarks, however, the expectation is that your FCF margins will improve as you scale.

By the time SaaS companies reach $50-100M of ARR, the median FCF margin is -27%.

8. Gross Margins Remain Constant As Startups Grow

One of the benefits of the SaaS business model is high gross margins.

There are no physical materials needed to produce SaaS products in most instances. The main Cost of Goods Sold (COGS) for SaaS companies involve hosting and any software your product is built on.

These expenses also scale with growth.

For instance, a SaaS company’s server expenses may increase as the customer base grows. The revenue growth from the new customers either keeps pace with or outpaces the added server costs needed. These high margins help venture-backed SaaS companies sustain despite being unprofitable.

According to the reports we analyzed, the median gross margin for SaaS companies tends to be between 70-80%, regardless of annual revenue.

gross margin by revenue benchmarks

We also compared gross margins based on funding rounds and found a similar trend. Although we did notice that gross margins increase more once SaaS companies reach the Series A stage.

gross margin by funding round benchmarks

9. Efficient Growth is Becoming a Priority For VCs

Although growth at all costs has been a widespread mindset in the VC world for some time, things are shifting.

In 2022, we saw a slowdown in VC funding due to economic uncertainty. Startups weren’t able to raise funds as easily as they did in 2020 or 2021, and according to Crunchbase data, global funding has been on a downward trend.

graph of global vc funding by month through july 2022

This pullback could signal a push towards efficient growth.

At the same time, we’re seeing more startups tracking efficiency metrics like The Magic Number, which we highlighted earlier, Rule of 40, and Burn Multiple.

Burn multiple is a metric created by venture capitalist David Sacks to measure how much money a startup burns to generate each dollar of revenue. To calculate your burn multiple, divide net burn by net new ARR. The result is your burn multiple.

Here are the benchmarks set by Sacks.

burn multiple benchmarks

According to Sacks, VC-backed SaaS companies should aim for a Burn Multiple under two, with the most efficient companies reaching a Burn Multiple of one or lower.

During times when investors are becoming stricter about which companies they invest in, Burn Multiple will likely become increasingly important.

Startups with a proven track record of turning cash into revenue (i.e., a low burn multiple) will be much more appealing to investors than startups that burn through cash with little to no revenue to show for it.

When comparing your burn multiple to the benchmarks above, consider the stage of your startup.

Take a look at this example from Sacks:

“Q1 just ended and it’s time for a board meeting. The startup reports that it burned $2M in the quarter while adding $1M to its ARR. That’s a 2x Burn Multiple — reasonable for an early-stage startup. On the other hand, if the company burned $5M in Q1 to add $1M of net new ARR, that’s a terrible Burn Multiple (5x). It should probably cut costs immediately. That company is spending like a later-stage company without delivering later-stage growth.”

A high burn multiple early on is a sign of inefficient growth. In other words, it costs you too much money to grow revenue.

This puts you in a difficult position because:

  • You’ll be in a constant chase to raise money to grow, and
  • Raising money will be more difficult.

Some investors will naturally be concerned with how much you’re spending relative to revenue growth. And the investors who aren’t scared off likely won’t give you the best terms due to your startup’s financial state.

As you can see, while burn multiple is a relatively simple metric, it can tell you a lot about your company.

Measure & Optimize Your Growth

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Data Sources

Find all the sources for the data included in this report below:

ARR Growth

What it measures:
The change in annual recurring revenue over a year.

Why you should measure it:
ARR growth rate allows you to measure how much (and how quickly) your company is growing over time. ARR growth is also a good indicator of how well customers adopt your product. Plus, it’s an important metric for fundraising, as it shows investors your growth trajectory.

Learn more

arr growth benchmarks

Burn Multiple

What it measures:
How much your startup burns to generate each dollar of revenue.

Why you should measure it:
Burn multiples give insights into how efficiently you’re growing revenue. Per venture capitalist David Sacks, the creator of the burn multiple metric:

The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is.

Learn more

burn multiple benchmarks

CAC Payback Period

What it measures:
The number of months it will take to recover the cost of acquiring one new customer.

Why you should measure it:
CAC payback helps you understand how efficiently you acquire customers. A long payback period indicates you’re spending too much to acquire customers or not charging enough.

Learn more

cac payback period benchmarks

Free Cash Flow (FCF) Margin

What it measures:
How much cash your company generates after accounting for expenses (COGS, operating, and capital expenses) and adding back non-cash expenses

Why you should measure it:
FCF essentially measures the ability of your company to generate profit. A higher FCF margin indicates that your startup can turn a larger percentage of its sales into cash. For VC-backed SaaS companies, growth is often prioritized over profitability, so it’s not uncommon to have a negative FCF margin (as you’ll see in the benchmarks below).

Learn more

free cash flow margin benchmarks

G&A Spend as a Percentage of Revenue.

What it measures:
The percentage of annual revenue your company spends on expenses that aren’t directly tied to producing or selling your product or service but are necessary to keep your business functioning. Common examples include finance, legal fees, HR, and admins.

Why you should measure it:
G&A spend helps you understand the cost of running the backend of your business. Since these expenses don’t often tie back to revenue, keeping them at a manageable level will allow you to operate more efficiently and invest more into growth.

Learn more

general and administrative spend benchmarks

Gross Margin

What it measures:
How much revenue you retain after incurring the total cost it takes to produce and sell your product or service. This excludes costs like sales and marketing or general and administrative expenses.

Why you should measure it:
Gross margins are a crucial indicator of how efficiently you can produce your product. High gross margins allow you to spend more on customer acquisition, operations, and overall growth.

Learn more

gross margin by revenue benchmarks

gross margin by funding round benchmarks

Growth Endurance

What it measures:
The rate at which growth is retained from one year to the next.

Why you should measure it:
Growth rates tend to decay over time as your startup grows. However, to maintain a positive growth trajectory, you should aim to retain as much growth as possible YoY.

Learn more

growth endurance benchmarks

This data assumes that the company triples to $1M of ARR in year one.

LTV / CAC Ratio

What it measures:
The relationship between how much a customer spends on your products/services over their lifetime (i.e., before they churn) and how much it costs to acquire them.

Why you should measure it:
LTV/CAC ratio helps you gauge whether or not you’re paying too much to acquire customers.

Learn more

ltv cac ratio benchmarks

Magic Number

What it measures:
How much revenue your company generates from each dollar spent on sales and marketing for customer acquisition.

Why you should measure it:
The magic number helps you gauge how efficiently your sales and marketing channels perform. If your magic number is too low, it could indicate that you’re spending too much on sales and marketing based on your current pricing.

Learn more

magic number benchmarks

Net Retention

What it measures:
The percentage of recurring revenue that you retained in a given period. This includes new revenue from existing customers upgrading their accounts or subscribing to new products.

Why you should measure it:
Net retention shows your company’s ability to retain and grow revenue from your existing customers. Increasing revenue by upselling your current customers while minimizing churn is an excellent sign for startups with a recurring revenue model.

Learn more

Percentage of New ARR from Existing Customers.

What it measures:
The amount of your new ARR generated from existing customers versus newly acquired ones.

Why you should measure it:
The more revenue you can generate by upselling your existing customers, the less reliant you are on acquiring new customers to grow. Generally speaking, it’s also less expensive to upsell an existing customer than acquire a new one.

Learn more

R&D Spend as a Percentage of Revenue

What it measures:
The percentage of annual revenue your company spends on building, maintaining, and updating your product.

Why you should measure it:
Traditionally, R&D expenses for SaaS companies aren’t a major expense. However, as product-led growth has become more popular, SaaS companies are dedicating a more significant portion of their revenue to enhancing their products. However, balancing your spending is crucial because, unlike S&M expenses, revenue growth doesn’t tend to scale linearly with R&D expenses.

Learn more

research and development spend benchmarks

sales and marketing spend benchmarks

Revenue Per Employee

What it measures:
How much ARR your company generates per full-time employee.

Why you should measure it:
Revenue per employee is most effective when benchmarking your company against similar startups. Suppose other startups at your stage generate significantly more revenue per employee than you. In that case, it could signal that your team is too big or you’re not generating enough revenue.

Learn more

revenue per employee benchmarks

Sales & Marketing Spend as a Percentage of Revenue

What it measures:
The percentage of annual revenue your company spends on sales and marketing.

Why you should measure it:
Since sales and marketing often drive the majority of revenue for SaaS companies, tracking how much you’re investing in these departments and the return is vital. If you’re spending a significant amount on S&M, but revenue isn’t growing at the same rate, it could indicate that your S&M efforts need to be optimized.

Learn more

sales and marketing spend by revenue benchmarks

sales and marketing spend benchmarks

Need more metrics?

Looking for more SaaS metrics? Check out our full glossary here: