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 × (1 + growth rate) × (1 - churn rate).

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 — upsells and seat growth. Top SaaS companies report 120%+ NRR (expansion exceeds churn) and under 10% gross annual churn.

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

Bottom-up forecasting builds revenue from your pipeline, sales rep capacity, conversion rates, and ACV — 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.

Free Tool

Revenue Forecast

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