5 SaaS benchmark types you should know for 2025

Benchmarking a SaaS product or company can be challenging. There are many variables one needs to consider, and it can be easy to get distracted by vanity metrics. 

The goal of this guide is to give you a breakdown of the importance of SaaS benchmarks. We’ll also explore different types of benchmarks within this industry.

Key benchmarks explained:

• Growth benchmarks: Rule of 40, ARR growth rates
• Retention benchmarks: NRR, GRR, customer lifetime value
• CAC benchmarks: New customer CAC ratio, blended CAC ratio
• Efficiency benchmarks: CAC payback period, SaaS Magic Number
• Revenue benchmarks: ARR movements, expansion vs. contraction

Let’s begin.

Current SaaS growth trends

The SaaS market is stabilizing after the rapid growth seen in 2020 and 2021. While overall growth rates have slowed, SaaS companies continue to innovate and adapt. Key insights from High Alpha’s 2024 SaaS Benchmarks Report include:

• SaaS revenue stabilization: Growth rates for public SaaS companies have leveled at around 17% to 18% year-over-year in 2024 after a decline from mid-30s in 2021.
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• Expansion revenue focus: The proportion of annual recurring revenue (ARR) from expansion increased from 28.8% in 2020 to 32.3% in 2023.
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• AI-driven growth: AI-native SaaS companies are outperforming horizontal SaaS peers, with median ARR growth rates reaching 100% for early-stage companies.

In addition to these trends, SaaS companies are increasingly focusing on vertical-specific solutions. By tailoring products to niche industries, businesses can unlock new growth opportunities and secure higher retention rates. This strategy is particularly evident in industries like healthcare and education, where specialized features are in high demand.

SaaS companies are also leveraging partnerships and integrations to drive growth. By collaborating with other platforms and third-party tools, businesses can expand their customer base and create more seamless user experiences. 

For example, integrations with customer relationship management (CRM) systems, analytics tools, and marketing automation platforms have become essential for increasing product stickiness and driving long-term growth.

Key insight: Companies are shifting from growth at all costs to sustainable scaling. AI adoption plays a pivotal role in ensuring efficiency and scalability.

Growth benchmarks

In SaaS, growth is the name of the game. But what's a good growth rate? Well, it depends on some factors:

• Stage of business: Early-stage startups are capable of incredible acceleration. As companies mature, growth naturally slows down. Don't be discouraged if your growth rate isn't in the triple digits. What's considered "good" varies depending on where you are in your journey.
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• The Rule of 40: This benchmark balances growth and profitability. Companies achieving an ARR growth rate and net profit margin of at least 40% are viewed favorably by investors. 
  
  For public SaaS companies, Rule of 40 scores above 40% correlate with significantly higher revenue multiples. 

• Top performers vs. others: Top-performing SaaS companies are growing three times faster than their peers. This shows that exceptional growth can be achieved while maintaining profitability.

Another critical metric is sales efficiency, which measures how effectively your sales team converts pipeline into revenue. Companies with a sales efficiency score of 1.0 or higher are considered highly effective, showcasing a strong alignment of sales and marketing efforts.

It is also important to track the contribution of expansion revenue to overall growth. Companies that derive a significant portion of their ARR growth from expansion, such as upselling and cross-selling existing customers, are more likely to achieve sustainable scaling. 

Key insight: Don't sacrifice profitability for the sake of growth. Sustainable growth is the key to long-term success in the SaaS industry.

Retention benchmarks

In SaaS, your retention benchmarks measure how well you keep your existing customers. Let’s look at some more key insights related to these benchmarks: 

• Net revenue retention (NRR): It measures the percentage of revenue retained over a period of time. It includes expansion revenue from upsells and cross-sells. A good NRR is above 100%, meaning you're retaining customers and growing their value.
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• Gross revenue retention (GRR): Indicates revenue retention excluding upsells. GRR improvements are a precursor to better NRR. Median GRR across ARR bands improved significantly in 2024.
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• Customer lifetime value (LTV): The total revenue you expect from a customer during their lifetime. Paired with customer acquisition cost (CAC), it highlights the efficiency of your acquisition and retention efforts.
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• The 100% club: SaaS businesses that have reached scale should aim for an NRR of over 100%. This indicates strong product-market fit and the ability to generate recurring revenue.
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• B2B vs. B2C: Retention benchmarks vary significantly between B2B and B2C SaaS companies. B2B companies typically have higher retention rates due to larger deal sizes and longer sales cycles.

Retention strategies must also account for customer engagement. Companies that actively monitor product usage and implement customer training programs often see significantly higher retention rates. 

Remember that by educating customers on how to maximize value, SaaS providers can deepen their relationships and secure long-term loyalty.

Moreover, businesses are implementing proactive renewal strategies, such as automated reminders and simplified subscription management processes, to reduce the likelihood of churn during renewal periods. 

These strategies provide a smoother experience for customers and improve retention rates across subscription cohorts.

Key insight: Don't just focus on acquiring new customers. Invest in keeping the ones you already have. A high NRR can lead to better growth, higher valuations, and a more capital-efficient business.

Churn benchmarks

Churn is the opposite of retention. It's the rate at which customers leave your service, and you want to keep this as low as possible. Let’s look at more insights linked to this benchmark:

• Negative churn: This is the holy grail of SaaS. It means that the revenue you gain from expansion exceeds the revenue you lose from churn. It signals a truly exceptional product and a loyal customer base.
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• The higher the ARPA, the lower the churn: Companies with higher average revenue per account (ARPA) tend to have lower churn rates as they often have more resources to invest in customer success and support.

Another strategy to combat churn is the use of loyalty programs. Offering discounts, rewards, or exclusive features to long-term customers can enhance satisfaction and encourage renewals. These programs are especially effective for B2B SaaS companies with high annual contract values (ACVs).

Finally, tracking churn by customer segment can provide deeper insights into specific retention challenges. Understanding whether churn is higher among small business customers, enterprise clients, or a specific industry can help businesses tailor their retention strategies and reduce risk more effectively.

Key insight: Churn is inevitable, but it can be managed. By understanding your churn rate and its drivers, you can take steps to reduce it quickly. 

Annual recurring revenue movement benchmarks

ARR movement benchmarks provide insights into the underlying dynamics of your business. They break down your ARR into its constituent parts: new business, expansion, reactivation, contraction, and churn.

Let’s look at each of these more closely:

• Expansion's growing role: As companies mature, the proportion of ARR gained from expansion tends to increase. This shows the importance of upselling and cross-selling to your existing customers.
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• Churn vs. contraction: Churn is the most significant contributor to ARR loss. Contraction (downgrades) becomes more significant as you scale. It's important to monitor both to get a complete picture of your revenue health.

Key insight: By analyzing your ARR movements, you can identify trends and patterns that inform your growth strategies. For example, if you see a high rate of contraction, you might need to adjust your pricing or packaging.

CAC benchmarks

Customer acquisition costs are among the most critical metrics in SaaS. They provide direct insights into how efficiently your company is acquiring new customers. Here are key metrics to focus on:

• New customer CAC ratio: The ratio of sales and marketing costs to new ARR. A lower ratio indicates more efficient acquisition.
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• Blended CAC ratio: It combines acquisition costs for new and existing customers, and it’s useful for understanding overall marketing efficiency.
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• CAC payback period: Measures the time required to recover acquisition costs. For early-stage companies, the median is 8 months, increasing to 20 months for larger companies.

In addition to these metrics, companies are also focusing on optimizing their marketing channels. Metrics like cost per lead (CPL) and cost per acquisition (CPA) are critical for refining campaigns and ensuring a high return on investment.

Key insight: Companies with optimized CAC payback periods attract investors and sustain long-term profitability.

Efficiency benchmarks

Efficiency benchmarks help SaaS companies gauge how well they are utilizing their resources to generate revenue. They are especially useful as companies scale and seek sustainable growth. Let’s look at some key metrics you should keep on your radar:

• SaaS Magic Number: Calculated as the ratio of quarterly ARR growth to sales and marketing spend. A number greater than 1 is ideal, signaling efficient growth.
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• ARR per employee: Highlights efficiency in revenue generation. Median ARR per employee improves as companies scale, peaking at $175,000 to $200,000 for mid-stage companies. 

Monitoring engineering efficiency metrics, such as feature delivery timelines and cost per feature, can also provide deeper insights into operational performance. This is particularly important for companies developing complex or AI-driven features.

Revenue benchmarks

Analyzing ARR movements provides insights into revenue dynamics:

• Expansion vs. contraction: As companies mature, a larger portion of ARR comes from expansion rather than new customers. For companies with over $50M ARR, 90% of new revenue comes from expansion.
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• Churn vs. downgrades: While churn is the primary driver of ARR loss, contraction (downgrade revenue) grows more significant as companies scale.

Cross-functional collaboration is also crucial for driving revenue. By aligning sales, product, and customer success teams, companies can identify upsell opportunities and reduce revenue leakage.

Key insight: ARR analysis helps identify revenue trends, enabling targeted strategies for growth.

Impact of AI on growth rates

AI is changing the SaaS industry, driving innovation and enabling companies to achieve new levels of efficiency and scalability. Here's a deeper dive into how AI is shaping SaaS growth:

• Adoption across the board: The 2024 SaaS Benchmarks Report reveals that 56% of surveyed SaaS companies have integrated AI features into their products, with an increasing number adopting usage-based and hybrid pricing models.
  
  This shift reflects a broader industry trend where AI is becoming a cornerstone of SaaS operations.

• Efficiency gains through automation: AI is simplifying processes across departments. From automating customer support to enhancing predictive analytics, AI tools are reducing costs while delivering faster and more personalized customer experiences.
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• Impact on revenue metrics: AI-native companies are outperforming traditional SaaS businesses, with top-quartile companies reporting significantly higher NRR and GRR. AI-driven customer success initiatives are helping businesses retain customers longer and identify upsell opportunities.
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• AI in product development: Many SaaS companies are leveraging AI to introduce smarter, more adaptive features. These innovations not only improve customer satisfaction but also create natural upsell levers, contributing to higher ARR growth.
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• Cost management: AI is also playing a critical role in optimizing cloud costs and infrastructure. Companies using AI to predict usage patterns and manage resources dynamically have seen improvements in gross margins.
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• Future outlook: As AI becomes embedded in SaaS business models, its impact will extend beyond growth rates. 
  
  Founders and executives will need to stay ahead of AI trends to maintain competitive advantages, focusing on areas like ethical AI deployment, evolving pricing strategies, and data privacy compliance.

AI is also transforming how companies approach data-driven decision-making. Predictive analytics, powered by machine learning, allows businesses to anticipate customer needs and optimize pricing strategies, further enhancing revenue potential.

Future outlook: AI will continue to redefine SaaS benchmarks, emphasizing ethical deployment and evolving pricing models.

Why SaaS benchmarks matter

SaaS benchmarks provide a critical framework for evaluating performance, identifying opportunities, and driving growth. 

By comparing key metrics against industry standards, companies can pinpoint strengths and weaknesses, informing strategic decisions. 

For example, a below-average NRR might signal the need for better customer success efforts, while a favorable Rule of 40 score could underscore strong financial health. Also, SaaS reporting tools play a vital role in gathering and presenting these metrics effectively.

Insights for operational efficiency

Operationally, benchmarks highlight areas for efficiency improvements. They help teams allocate resources more effectively, ensuring maximum ROI on sales, marketing, and product development investments. 

By focusing on areas where you lag behind peers, your company can adopt targeted strategies to optimize results. These efforts also boost overall SaaS performance, positioning your company as a leader in operational excellence.

Building investor confidence

Investors use benchmarks to gauge the potential of SaaS businesses. Companies exceeding industry standards in metrics like ARR growth or CAC payback are more likely to attract funding and sustain long-term profitability. 

Benchmarks demonstrate both the scalability and sustainability of a business, making it a more appealing investment opportunity.

Strengthening customer success strategies

Benchmarks offer actionable insights into customer success initiatives. For instance, a below-average NRR might highlight the need to refine onboarding processes or introduce personalized customer success programs. 

These refinements not only improve retention but also unlock upsell opportunities.

Improving competitive positioning

SaaS benchmarks can help identify where a company stands against its competitors. Metrics like ARR growth and gross margin reveal strengths and weaknesses relative to peers. Companies leveraging these insights can adjust pricing, expand offerings, or improve service levels to gain a competitive edge.

Supporting long-term strategic planning

Benchmarks provide a foundation for long-term strategic decisions. By analyzing trends in efficiency metrics, retention, and ARR movements, companies can develop plans to scale sustainably. These metrics ensure that growth strategies are both realistic and aligned with market conditions.

Moreover, presenting benchmark data effectively can also improve internal alignment. Teams across departments can rally around clear goals when performance metrics are visible and actionable.

TL;DR: Ultimately, benchmarks serve as both a diagnostic tool and a roadmap, offering actionable insights that drive smarter decisions and foster a culture of continuous improvement.

Next steps

By now, you should have a deeper understanding of the importance of SaaS benchmarks. They help to assess your company's performance, inform strategic planning, and attract investors. 

However, it's key to remember that these SaaS metric benchmarks are influenced by various factors. One of the most critical is how effectively SaaS businesses manage their billing. An effective billing process is key for reducing friction and minimizing revenue leakage. 

This is where an extensible billing platform like Orb comes in. 

Orb solves billing for SaaS businesses. The goal? Help unlock your full revenue potential.

Orb offers a range of features designed to address the challenges of billing and revenue management. Here’s a quick peek:

• Effortless integration: Orb integrates with your product and tech stack, including data warehouses, payment portals, and CRMs. This results in accurate usage data capture and a single source of truth, which are crucial for revenue calculations.
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• Customizable usage tracking: Orb allows you to define and track the specific usage metrics that matter to your business. By combining usage data with pricing data, Orb provides clear insights into customer behavior and revenue drivers.
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• Flexible pricing models: Orb enables you to quickly design and implement a wide array of pricing models, from simple to complex. This empowers companies to optimize their pricing and drive growth, helping them reach and even exceed SaaS benchmarks.
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• Automated billing: Orb automates the entire billing process, including everything from calculation to invoicing and payments. This saves you time and resources while reducing the margin for errors.

What’s more, Orb provides real-time reporting tools that give businesses the insights they need to refine pricing and identify new revenue opportunities. With data-driven billing, companies can unlock their full growth potential.

Learn how Orb can help you establish a hassle-free usage-based billing model.