How do you forecast SaaS revenue?

SaaS revenue forecasting starts with current MRR, then models growth rate (new customer acquisition) and churn rate (customer losses) month over month. The formula: Next month MRR = Current MRR + (Current MRR × growth rate) - (Current MRR × churn rate), i.e. growth and churn are both applied to the current month's base. Compounding them instead (multiplying the two factors) charges churn on the new revenue as well, which is why hand-checks against that version come out slightly lower.

What is the difference between MRR and ARR?

MRR (Monthly Recurring Revenue) is your total recurring revenue per month. ARR (Annual Recurring Revenue) is MRR × 12. Investors typically use ARR for companies above $1M in recurring revenue and MRR for earlier-stage startups.

What is a realistic SaaS growth rate?

Seed-stage SaaS startups commonly grow 15-25% MoM in the first year, then taper. By Series A, healthy growth is 10-15% MoM (T2D3 trajectory). By Series B, 5-8% MoM is strong. Top-decile companies sustain 100%+ YoY growth past $10M ARR.

How do gross churn and net revenue retention differ?

Gross churn is the percentage of MRR lost to cancellations and downgrades, with no offset. Net revenue retention (NRR) includes expansion revenue from existing customers, such as upsells and seat growth. SaaS Capital's 2025 retention survey of more than 1,000 private B2B SaaS companies puts median NRR at 102% and the top quartile at 111%, so the 120%+ figure often quoted describes roughly the top decile, usually at enterprise contract sizes, rather than a normal target.

Should I forecast revenue bottom-up or top-down?

Bottom-up forecasting builds revenue from your pipeline, sales rep capacity, conversion rates, and ACV, which is much more defensible for board and investor conversations. Top-down (TAM × market share) is fine for vision-setting but should never anchor your operating budget. Use bottom-up for the next 12 months, top-down beyond.

What is the Rule of 40?

Rule of 40 says a healthy SaaS company should have growth rate + profit margin ≥ 40%. A company growing 60% with -20% operating margin scores 40. A profitable company at 10% growth with 30% margin also scores 40. Investors use this as a one-number quality check at Series B and beyond.

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Revenue Forecast

Project your MRR and ARR over the next 24 months, with growth and churn factored in.

Revenue Forecast

Model your MRR and ARR growth over 24 months

Current MRR ($)Monthly Growth Rate (%)Monthly Churn Rate (%)

MRR Projection

Monthly recurring revenue over 24 months

ARR Projection

Quarterly annualized recurring revenue

Monthly Growth Breakdown

New MRR vs churned MRR each month

Key Milestones

When you hit key ARR targets

$1M ARR

Reached in Jul 27 (month 8)

Jul 27

$5M ARR

Not reached within 24 months

Net Growth Rate

7.0% monthly net growth

+7.0%

MRR at 12mo

$112,610

ARR at 12mo

$1,351,320

MRR at 24mo

$253,619

ARR at 24mo

$3,043,428

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Frequently Asked Questions

How do you forecast SaaS revenue?: SaaS revenue forecasting starts with current MRR, then models growth rate (new customer acquisition) and churn rate (customer losses) month over month. The formula: Next month MRR = Current MRR + (Current MRR × growth rate) - (Current MRR × churn rate), i.e. growth and churn are both applied to the current month's base. Compounding them instead (multiplying the two factors) charges churn on the new revenue as well, which is why hand-checks against that version come out slightly lower.
What is the difference between MRR and ARR?: MRR (Monthly Recurring Revenue) is your total recurring revenue per month. ARR (Annual Recurring Revenue) is MRR × 12. Investors typically use ARR for companies above $1M in recurring revenue and MRR for earlier-stage startups.
What is a realistic SaaS growth rate?: Seed-stage SaaS startups commonly grow 15-25% MoM in the first year, then taper. By Series A, healthy growth is 10-15% MoM (T2D3 trajectory). By Series B, 5-8% MoM is strong. Top-decile companies sustain 100%+ YoY growth past $10M ARR.
How do gross churn and net revenue retention differ?: Gross churn is the percentage of MRR lost to cancellations and downgrades, with no offset. Net revenue retention (NRR) includes expansion revenue from existing customers, such as upsells and seat growth. SaaS Capital's 2025 retention survey of more than 1,000 private B2B SaaS companies puts median NRR at 102% and the top quartile at 111%, so the 120%+ figure often quoted describes roughly the top decile, usually at enterprise contract sizes, rather than a normal target.
Should I forecast revenue bottom-up or top-down?: Bottom-up forecasting builds revenue from your pipeline, sales rep capacity, conversion rates, and ACV, which is much more defensible for board and investor conversations. Top-down (TAM × market share) is fine for vision-setting but should never anchor your operating budget. Use bottom-up for the next 12 months, top-down beyond.
What is the Rule of 40?: Rule of 40 says a healthy SaaS company should have growth rate + profit margin ≥ 40%. A company growing 60% with -20% operating margin scores 40. A profitable company at 10% growth with 30% margin also scores 40. Investors use this as a one-number quality check at Series B and beyond.

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