Dave "CAC" Kellogg and Ray "Growth" Rike discuss how a "growth rate" endures for a SaaS company trend over time!
Topics covered during the conversation include:
Growth Endurance is the measure of how a company's growth rate endures over time: GE = current year’s growth rate / last year’s growth rate.
At an 80% Growth Endurance (2021 value) says that a companies growth rate in the next year will be 80% of the current years growth
- example: 70% growth this year would predict 56% growth next year
Growth Endurance has decreased over the last two years and is NOW ~ 65% (2023)
- example: 70% growth this year would predict 45.5% growth next year
Growth Endurance decreasing from 80% to 65% may not sound that bad but let's look at the impact over 5 years at a $10M ARR company today but...
Using a 6.5x "Enterprise Value to Revenue" multiple that projects a material decrease in Enterprise Value 👇
The change in Growth Endurance translates into a $437M decrease in EV (at the same 6.5x multiple)
🤷♂️ If Growth Endurance has decreased by 15% over the past two years and Customer Acquisition Cost & Growth Efficiency have not improved materially over the past 7 quarters it might be time to change <insert ideas here>...
The "T2D3" Growth Model suggests the below ARR growth for a B2B SaaS company
The "56789" Growth Model suggests the below ARR growth for a B2B SaaS company
If you are a fan of B2B SaaS and have a desire or need to stay on top of the most recent trends this episode is a great listen!
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