Maximize Your SaaS Growth: Understanding the Impact of Your Growth Ceiling

Feeling stuck with your SaaS growth?

You're not alone. Customer churnChurn RateChurn rate measures the percentage of customers or revenue lost over a given period. Customer churn counts lost accounts; revenue churn measures lost recurring revenue.Read more → can turn from a minor issue to a growth killer as your business grows.

Understanding the SaaS growth ceiling is the first step to solving this problem.

As your customer base grows, you get closer to the point where the amount of churned customers exceeds the number of acquired customers, leading to a growth stall or ceiling. Said another way, it's the most revenue/customers that your SaaS can achieve with its current growth engine.

So, how do you calculate the growth ceiling?

You can calculate the maximum number of customers by dividing the number of new customers by your churn rate percentage and multiplying it by the average revenue per user to get the maximum revenue.

Example: A SaaS business wins 20 new customers per month, with a 5% churn rate at an ARPUARPUAverage revenue per user (ARPU) measures the average monthly or annual revenue generated per user or account. In B2B SaaS, it's typically calculated as total recurring revenue divided by total number of customers.Read more → of $100/month. So running the math, we get total customers 20 / 5% = 400, and maximum MRRMonthly Recurring Revenue (MRR)Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue a SaaS company earns from active subscriptions. It excludes one-time fees, professional services, and variable overages, providing a clean measure of the subscription business's monthly run rate.Read more →, 400 * $100 = $40,000. So what does this mean? We will never be able to grow beyond 400 customers and will max out our MRR at $40K.

By calculating your SaaS growth ceiling, you can identify the driving forces behind it and work on the three areas of your growth engine to prolong the time it takes to hit the ceiling:

🤝Increase customer acquisition rate

💰Increase average revenue per account (ARPA)

🌟Decrease churn rate

It's incredibly motivating knowing when your business will hit its ceiling, and it can provide clarity when you're struggling to understand what will impact your growth most.

To help with this, I created a calculator that lets you experiment with various scenarios to chart out your growth ceiling while considering all three levers. have a look and let me know what you think in the comments on LinkedIn.

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