Growth Rate
Growth rate is the percentage by which a metric (like MRR or active users) increases from one period to the next.
What it means
Growth rate is how fast you're moving. If you had 100 customers last month and 110 this month, your monthly growth rate is 10%. Compounded over a year, that's a ~3x business. The math of compound growth is brutal: small differences in growth rate produce massive differences in outcomes.
Most startups track weekly or monthly growth rate. Y Combinator famously suggested 5-7% weekly growth for early-stage startups, which compounds to roughly 13x per year. Most established SaaS businesses are happy with 5-10% monthly growth.
Growth rate is most useful when you compare it across time. A 20% one-month spike isn't meaningful. A 10% monthly growth rate sustained over 12 months is a real signal.
Why it matters
Growth rate is the metric investors care about more than any other. It tells you whether your business is accelerating, stable, or stalling. Two products with identical revenue can have completely different futures based on their growth rates.
How to calculate growth rate
Growth Rate = ((Current - Previous) / Previous) × 100
Subtract the previous period's value from the current period's value, divide by the previous period's value, multiply by 100.
Example with real numbers
Concrete example showing how this metric works in practice.
Scenario
Your MRR was $5,000 in March and $5,800 in April.
Calculation
(($5,800 - $5,000) / $5,000) × 100 = 16%
What it means
Your monthly growth rate is 16%, which is excellent. Sustained, that compounds to about 5x per year. Worth understanding what drove this month's growth and whether it's repeatable.
What's a good number?
Typical benchmarks. Always compare against your own historical data first, industry averages second.
Below 1% monthly
1% to 5% monthly
5% to 10% monthly
Above 10% monthly
These are general SaaS benchmarks. Early-stage startups can grow much faster (20%+ monthly is common) but also more volatile. Mature businesses typically grow slower (1-3% monthly is healthy).
Common mistakes
Things people get wrong when measuring growth rate.
Mistake 01
Looking at single-period growth without context. One great month can be misleading.
Mistake 02
Confusing growth rate with growth. 100 customers from 50 last month is 100% growth. 100 customers from 10,000 next month would still be growth, but a much smaller rate.
Mistake 03
Comparing growth rates across very different business sizes. A company doing $1M ARR growing 20% is very different from a company doing $100M ARR growing 20%.
Mistake 04
Annualizing monthly numbers naively. Monthly growth doesn't always extrapolate cleanly.
How to track it
Pick the metric that matters most (MRR, active users, signups) and calculate growth rate weekly or monthly. Plot it over time. The trend line matters more than any single data point.
Related concepts
Other terms worth learning if you're studying this one.
Common questions about growth rate
For early-stage startups, 5-7% weekly growth is exceptional. For established SaaS, 5-10% monthly is good. Anything above 10% monthly sustained for a year is great.
Subtract the previous period's value from the current period's value, divide by the previous period's value, multiply by 100. The result is the percentage growth.
Growth is the absolute change (added 50 customers). Growth rate is the relative change (grew 10%). Rate is usually more useful because it's comparable across business sizes.