SaaS ARR growth

Six ways to increase SaaS ARR and MRR

Stijn Hendrikse
Jan 14, 2019

Once your SaaS startup has passed Series A territory, you're expected to grow your Annual Recurring Revenue (ARR) at 2-3x rate per year.

The term T2D3 is sometimes used to describe this ideal five-year period of exponential growth.

Ways to increase SaaS ARR

The biggest mistake I've seen SaaS executive teams make is to focus on one part of their funnel.

The only way to drive ARR growth at the T2D3 pace is to address multiple SaaS KPIs in parallel: 

  • Churn - Reduce churn and fix any ‘leaky bucket’ before pouring in more cash.
  • CAC - Get your Customer-Acquisition-Cost under the Customer Lifetime Value. (LTV)
  • ARPU - Improve Average Revenue Per User (or Customer) and grow deal size.

In addition, your team needs to keep driving the growth of incoming leads and improve their quality (MQLs). 

But the days the product team and sales team could just point at marketing to drive SaaS growth are now over.

The product needs to be improved to help support customer retention and upselling opportunities. The sales team needs to sell in ways that drive high retention, and provide high-quality feedback to marketing to improve lead quality. 

Seven tactics to grow your SaaS ARR/MRR

It's truly a team sport to execute a high-growth ARR plan. Take a holistic view of your SaaS marketing function, including customer-facing and non-customer-facing departments. 

1. Reduce churn and improve retention

To do this, implement nurture and retention programs to reduce customer and revenue churn. 

To learn more about preventing SaaS churn, read these blogs: 

2. Optimize your marketing channels and spend

This can look different depending on what channels and areas of marketing you've invested in as a SaaS company. 

  • Optimize inbound and outbound marketing channels and lower your Customer-Acquisition-Cost.
  • Improve funnel speed and conversion by reducing friction along the buyer's journey.
  • Drive upsell discipline and scalability through automation to improve ARPU.
  • Improve conversion rate optimization (CRO) to increase session-to-contact rate across inbound leads.

3. Annual price increases

Most companies I work with are uncomfortable raising the prices of SaaS products. When they do, they’re often surprised that it does not impact sales volume at all. Make sure to also improve your product all the time, and continue to add value to your end-users. 

4. Growth Hacking

Implement mechanisms into your product that allow a marketing flywheel effect. Drive increased usage of capacity or features that lead to up-sell. Include various ways for your users to refer to others.

5. No discounting

For a SaaS company, the Life Time Value (LTV) of your customer is the holy grail. A one-time discount is maybe OK (best to make this a Try/Buy program) but stay away from discounts on your subscription.

Best case scenario, you’ll get customers who you don’t want anyway because they will churn at some point.

6. Pick the right Try/Buy period

The trial period should be enough to drive onboarding and for your customers to experience the value of the service. Lengthening the period beyond this will just allow people to procrastinate to use it and will allow you to not hurry up providing great onboarding.

7. Drive annual commitments

Once your clients have made it through your trial period, they are usually comfortable paying for a year ahead. No need to provide a steep discount. 5% is enough.

Increasing your SaaS ARR takes the right blend of marketing and sales

While only a small percentage of SaaS companies make it to $100M in 5 years, this focus on ARR growth is crucial and it has to be holistic. 

You cannot fall in the trap of just focussing on lead generation or customer success. MQL, ARPU, Churn, and CAC all need to be addressed together to get ARR (or MRR) to scale exponentially.  

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