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Estd 4.22.2023
In the fast-paced world of SaaS, growth metrics drive strategic decisions and valuation. While many executives focus on traditional KPIs like MRR growth or customer acquisition cost, there's a more nuanced metric that deserves attention: Blended Growth Rate (BGR). This powerful measurement provides a comprehensive view of your business's momentum by combining multiple growth dimensions into a single, actionable metric.
What is Blended Growth Rate?
Blended Growth Rate is a composite metric that incorporates multiple growth factors into a weighted average to provide a more holistic view of business performance. Unlike standalone metrics that might present an incomplete picture, BGR combines factors such as:
- Revenue growth
- Customer acquisition
- User engagement
- Expansion revenue
- Product adoption
The formula typically weights these components based on their strategic importance to your specific business model and goals.
According to OpenView Partners' 2023 SaaS Benchmarks report, companies with strong blended growth rates (considering both revenue growth and efficiency metrics) commanded 2-3x higher valuations compared to companies focusing solely on top-line growth.
Why Blended Growth Rate Matters for SaaS Executives
1. Provides a Comprehensive Health Check
Single metrics can mislead. Your MRR might be growing impressively, but if it's fueled by unsustainable marketing spend or accompanied by declining user engagement, trouble lies ahead. BGR forces you to look at multiple dimensions simultaneously.
2. Aligns with Investor Perspectives
In today's climate of capital efficiency, investors and acquirers evaluate companies across multiple dimensions. As noted by Bessemer Venture Partners in their State of the Cloud 2023 report, "The era of growth at all costs is over. Today's standout SaaS companies demonstrate balanced metrics across growth, retention, and efficiency."
3. Reveals Hidden Opportunities and Threats
By tracking multiple growth vectors, you might discover that while your headline revenue growth appears strong, your product adoption rate is lagging—signaling potential future churn. Conversely, you might find that while revenue growth has temporarily plateaued, user engagement is deepening, suggesting untapped monetization opportunities.
4. Supports Strategic Resource Allocation
Understanding which components of your blended growth are underperforming helps prioritize where to invest time and capital. This targeted approach delivers better ROI than chasing growth across all fronts simultaneously.
How to Measure Blended Growth Rate Effectively
Step 1: Select Your Growth Components
The specific components in your BGR should reflect your business model and stage. Early-stage companies might weight acquisition and engagement heavily, while more mature companies might emphasize expansion revenue and efficiency metrics.
Common components include:
- ARR/MRR growth rate
- Net revenue retention
- Customer growth rate
- Product adoption rate
- Feature utilization growth
- Expansion revenue growth
Step 2: Determine Component Weights
Assign weights to each component based on your strategic priorities. For example:
- Revenue growth: 40%
- Net revenue retention: 25%
- New customer growth: 20%
- Product adoption: 15%
According to data from KeyBanc Capital Markets' SaaS Survey, companies in the top quartile of performance now balance their focus with approximately 60% weight on growth metrics and 40% on efficiency metrics—a shift from the 80/20 split common during the 2015-2021 growth era.
Step 3: Calculate Individual Component Growth Rates
For each component, calculate the percentage growth over your chosen time period:
Component Growth Rate = [(Current Value - Previous Value) / Previous Value] × 100Step 4: Apply Weights and Calculate BGR
Multiply each component's growth rate by its assigned weight, then sum the results:
BGR = (Revenue Growth × 0.4) + (NRR Growth × 0.25) + (Customer Growth × 0.2) + (Product Adoption Growth × 0.15)Step 5: Track BGR Over Time
The real value comes from monitoring BGR trends over multiple quarters. This reveals whether your overall business momentum is accelerating, maintaining, or decelerating.
Implementing Blended Growth Rate in Your Organization
Create Executive Dashboards
Build BGR into your executive dashboard, showing both the headline figure and its components. This visualizes which elements are driving or dragging overall performance.
Set BGR Targets
Establish BGR targets alongside your traditional KPIs. According to Gainsight's Customer Success Industry Benchmark Report, companies that set composite growth goals (including both acquisition and retention metrics) outperformed their peers by 28% in long-term value creation.
Align Team Incentives
Consider tying incentive structures to BGR rather than single-dimension metrics. This encourages cross-functional collaboration rather than optimization of one metric at the expense of others.
Case Study: How One SaaS Company Transformed Using BGR
A mid-market B2B SaaS company discovered through BGR analysis that while their headline revenue growth was strong at 45%, their blended growth rate was only 28%. The discrepancy came from declining product adoption rates and plateauing expansion revenue.
By rebalancing resources toward customer success and product development, they improved their BGR to 52% within three quarters—higher than their previous revenue-only growth rate. This translated to improved capital efficiency and a 40% increase in their next funding round valuation.
Conclusion
In today's SaaS environment, sustainable growth requires a multi-dimensional approach. Blended Growth Rate provides executives with a powerful tool to understand true business momentum beyond simplistic headline metrics.
By implementing BGR tracking and making it central to strategic decisions, you'll gain a competitive edge through better capital allocation, more aligned teams, and a stronger narrative for investors and board members. Perhaps most importantly, you'll build a more resilient business prepared to thrive in varying market conditions.
The most successful SaaS companies don't simply grow—they grow in balance. BGR helps ensure you're doing exactly that.