B2B SaaS benchmarks in 2024

The B2B SaaS space is undergoing a subtle but significant transformation. The days of unbridled, "growth-at-all-costs" strategies are waning. Evidence shows they’re being replaced by a more measured, efficiency-focused approach. 

This shift is evident in B2B SaaS marketing benchmarks shaping the industry in 2024. We’ll analyze different benchmarks and take a look at what the data is telling us. 

First, let’s kick things off by looking at SaaS growth trends:

Why SaaS growth trends look promising despite slowdowns 

Growth remains a core objective for SaaS businesses, but the breakneck pace of recent years has tempered. While not at a standstill, growth rates have noticeably slowed down from the exceptional levels of 2020 and 2021.

However, this situation equals opportunity and trends show it: 

• Top quartile still thriving: The top quartile of B2B SaaS companies with ARR between $1 and $30 million achieved a 45% growth rate in 2023. This shows that even in a tougher market, strong companies with proven product-market fit can still achieve high growth.
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• Early-stage challenges: Early-stage startups face the greatest challenges in SaaS. This is particularly true for those with less than $1 million in ARR. However, even here, the top quartile managed an impressive 139.1% growth in the last 12 months. This shows that innovation and the right market can still fuel significant early traction.
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• Signs of stabilization: There are encouraging signs of stabilization, especially for larger companies. Those with ARR over $1 million saw a slight acceleration in growth in early 2023. 

When we then look at data from 2024, we see that the market is finding its footing. The emphasis is now on sustainable growth that balances ambition with financial prudence.

Key business metrics to track and boost according to B2B SaaS benchmarks

In SaaS tracking key performance indicators is more crucial than ever. Why? The answer is in annual recurring revenue (ARR). Overall ARR growth remains the most important indicator of a SaaS company's overall health and potential. 

The top-performing companies are those consistently hitting growth rates exceeding 100%. This sets a high benchmark for the rest of the industry.

The efficiency of customer acquisition is another critical factor in sustainable growth. 

A customer acquisition cost payback period of around 6 months is considered optimal. This enables rapid scaling while preserving financial health. Companies need to carefully track their customer acquisition costs and ensure they're getting a healthy ROI.

Data showing why annual recurring revenue (ARR) is growing

SaaS companies are increasingly recognizing the value of their existing customer base. Expansion revenue is becoming a critical driver of overall growth. Upsells and cross-sells are driving this uptick.  

Let’s look at the data:

• Shifting focus: The proportion of ARR from expansion has risen to 35%, and new business ARR now accounts for 53% in 2024. This trend indicates a slight shift towards expansion revenue compared to previous years​. 
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• Retention as a growth engine: Organizations with strong customer retention rates are outperforming their peers in growth. This shows the power of customer satisfaction and ongoing engagement in driving expansion.

How retention and churn have changed according to B2B SaaS benchmarks

Now, let’s take a look at what the data says about these two metrics. We’ll start with retention metrics: 

Retention metrics

Customer retention remains the cornerstone of long-term success in the B2B SaaS realm. By prioritizing customer satisfaction and engagement, companies are effectively minimizing churn.

Net revenue retention (NRR) should ideally surpass 100% for mature SaaS businesses. This means customer retention and revenue expansion from early adopters. Top-tier companies typically achieve NRR rates of around 110%. 

Gross Revenue Retention (GRR) measures revenue retention without factoring in expansions. It provides a baseline measure of customer loyalty and product stickiness. This metric has grown in importance, showing the importance of core users in 2024.

Churn metrics

Churn is unavoidable. It can, however, be managed and reduced through proactive measures. This is becoming truer for early-stage businesses. Successful SaaS companies are actively engaged in initiatives aimed at improving product quality.

The pinnacle of churn management is now the attainment of negative net MRR churn. This is a scenario where revenue from existing customers surpasses losses from churn and downgrades. It’s a testament to the power of a robust customer success strategy and a well-executed expansion plan. 

Impressively, 40% of companies with ARR between $15-30 million have reached this milestone. This showcases the potential for substantial growth even in a challenging market.

Spending benchmarks analyzed in detail

Funding models play a significant role in spending behavior. Equity-backed companies generally spend more aggressively than their bootstrapped counterparts. Let’s analyze the data from B2B SaaS benchmarks:

• Total spend: Bootstrapped companies typically operate with a tighter budget. They spend a median of 93% of their ARR. 
  
  In contrast, equity-backed companies tend to spend 109% of ARR. They are fueled by external investments and a focus on rapid growth. This highlights the strategic trade-offs companies make based on their funding model and growth goals.

• Departmental spending: This cross-department resource allocation offers further insights into spending priorities. 

Here’s a detailed breakdown of data found in a late 2023 benchmark:

• Sales and marketing: These functions often account for the largest share of spending. They’re critical for customer acquisition and revenue generation.  Median spending on sales and marketing ranges from 27% to 45% of ARR, depending on company size and growth stage.
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• Research and development (R&D): R&D is a vital investment, and innovation is a key business driver. Because of this, median R&D spending is around 18%. This reflects the ongoing need for continuous improvement and development.
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• Customer success: Providing exceptional customer experiences boosts retention and expansion. Companies typically allocate a median of 8.5% of ARR to customer support functions.
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• General and administrative (G&A): This category encompasses various administrative functions like finance, HR, and executive leadership. Median G&A spending is around 11% of ARR.
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• Hosting and DevOps: These two are the backbone of SaaS operations. Hosting and DevOps typically account for approximately 5% and 4% of ARR, respectively.
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• Cost of goods sold (COGS): Consider the costs directly associated with delivering your SaaS product. The breakdown includes hosting costs (5%), DevOps costs (3%), professional services COGS (3%), and other COGS (1%). 

Capital efficiency B2B SaaS benchmarks

Capital efficiency has taken on paramount importance for SaaS companies. Getting the funds hasn’t become the central issue. Now the challenge has shifted to actually using said funds efficiently. Let’s analyze this phenomenon by looking at the numbers:

ARR per employee

This metric is a simple yet powerful indicator of productivity and efficiency. It is gaining increasing prominence. 

As companies scale, they should strive to increase their ARR per employee. Aiming for $200k to $250k at maturity is ideal. This reflects a lean and efficient operation that can generate revenue with a relatively small workforce.

ARR to capital raised ratio

This metric is a financial snapshot. It shows how effectively a company is turning invested capital into recurring revenue. 

According to the data, the goal is to achieve a ratio above 1.0. This shows that the ARR generated exceeds the capital raised. High-growth companies might prioritize growth over this ratio in the short term. This becomes more important as companies mature and seek sustainable profitability.

Burn multiple 

The burn multiple is a measure of cash burned relative to net new ARR. It is a critical indicator of capital efficiency. 

According to 2024 benchmarks, a burn multiple under 1.0x is considered exceptional. Anything above 2.0 raises concerns about a company's ability to sustain its growth trajectory without extra funding.

Key takeaways

Having thoroughly analyzed B2B SaaS benchmarks, here are some takeaways: 

• Prioritize expansion over acquisition: The cost of new customer acquisition is rising. Shifting focus towards expanding existing customer relationships is critical. Invest in upselling, cross-selling, and customer success initiatives to drive revenue growth.
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• Retention is your lifeline: Customer retention is impacting growth and profitability more than ever. Double down on customer satisfaction, product value, and proactive engagement too. This will help with keeping churn down.
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• Balance growth with profitability: The "growth at all costs" mentality is fading. Find the sweet spot between aggressive growth and sustainable profitability. This is especially true since funding is getting more selective. 
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• Customer lifetime value (LTV) is king: Shift focus from short-term wins to long-term customer value. Improve pricing, packaging, and product experiences to maximize LTV. 

In B2B SaaS, benchmarks reveal a clear trend. Growth and customer retention are and will continue to be paramount. These metrics hinge on your ability to manage complex pricing models, subscriptions, and invoicing. These are the core functions of a robust billing system.

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