120% NRR: Your revenue doubles in 5 years even with no new customers
110% NRR: Your revenue doubles in 8 years even with no new customers
100% NRR: Your revenue stays the same with no new customers
— Jason ✨BeKind✨ Lemkin ⚫️ (@jasonlk) April 20, 2021
We all have figured out now that top-tier NRR is the key to the winners in SaaS. Some best-of-breed examples:
- Snowflake’s NRR is 162%. A great benchmark for developer-centric mission-critical services.
- UiPath’s NRR is 145%. Top-tier for B2B enterprise software.
- Slack’s NRR is 125%. A solid yardstick for a product that is 50/50 enterprise and SMB, with a great Free edition.
- Smartsheet’s NRR is 123% from SMBs. This is probably about as good as it gets for SMBs.
So we all know this matters, and that world-class here is a critical lever in SaaS. It helps you scale much faster, more efficiently.
But what we tend to get wrong is just how powerful even 110% NRR is.
- 125% NRR: A $10m business grows to $25m in 5 years and $75m in 10 years with no new customers. Whoa.
- 120% NRR: A $10m business grows to $20m in 5 years and $50m in 10 years with no new customers.
- 110% NRR: A $10m business grows to $15m in 5 years and $24m in 10 years with no new customers.
Ok, but it gets even better. Let’s say you can do 120% NRR. Very good, but less than Smartsheet, Slack, etc.
Now let’s say all you do is add 30% new customer growth. That’s it. Not crazy 100% growth, but just 30% new customer growth.
At $10m, combine 120% NRR and just 30% new customer growth and here’s the magic of compounding. A truly awesome force of nature:
In 5 years, that $10m ARR business now is doing $50m. And in 10 years, it’s doing $150m. And is a unicorn, or maybe even more.
And look, you can do this. I know you can. Get to 120% NRR, or even just 110%. Add even 30% new customers a year. That’s not crazy growth. And the key is to keep them all happy, and keep adding more and more awesome features and functionality.
Then … you’ll have a unicorn. Not this year, or next. But definitely, almost for sure, in 5-10 years.