Mike’s Note — Natural Growth Rate
Publishing this on the weekend…It would be a lie if I said I was A/B testing engagement. I ended up in an all day workshop Friday with some university students — it is always refreshing seeing what the next generation is working on. I digress…
I recently came across a great blog post by OpenView called “The New SaaS Metric You Should Be Tracking“. In short, the argument is that current SaaS metrics are dated and as go-to-market models shift to product led growth we should evaluate these businesses with a new set of metrics. The core thesis is that PLG companies don’t have the same immediate growth rates as SaaS companies of yesteryear since they take time to compound.
In the post, they introduce a metric called “Natural Rate of Growth”, how to compute it and some associated benchmarks. NRG is essentially a growth metric that removes paid channels such as BDRs, paid ads, events, etc. It primarily accounts for organic, direct and referral customers. We built an easy Google Sheet to calculate your rate here.
I felt that this was worth sharing because many companies are adapting their go-to-market motion as the macro environment is changing. Market defined metrics are great proof points in fundraising as well as benchmarking yourself to other SaaS companies. Reminder: Here is the Google Sheet.