We All Sort of Underestimate the Power of 110%+ NRR

We all have figured out now that top-tier NRR is the key to the winners in SaaS.  Some best-of-breed examples:

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.

Simple maths:

  • 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.

Published on April 30, 2021

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