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What is a good customer growth rate?

4 min read

What is a customer growth rate you should strive for? The speed with which your business acquires customers isn’t always a key indicator of success, but it certainly reflects market demand for your goods and/or services. Customer success analytics is the process of breaking down why and where you are acquiring customers, how long they stay customers, and what wins their loyalty. Then, organizations define customer success benchmarks to improve customer lifetime value or shorten the cycle between repeat purchases.

But wait, you didn’t come here to talk about how awesome customer success teams are — or maybe you did. For now, let’s focus back on customer growth, and how it connects to the people and processes behind the scenes at a business.

How Do You Calculate Customer Growth Rate?

Measuring customer growth requires you define what “growth” means in context for your business. Does growth mean more accounts, or more dollars? There are a few common SaaS customer growth rate metrics.

  • Churn Rate: The churn rate is a comparison between how fast you acquire and lose customers. Depending on your product and business model, you might have high churn after free trials run out, or low churn with a long buying cycle.

  • Average Customer Value: The average customer value can go up through repeat purchases or upgrades to a subscription. Even if you aren’t attracting new users, if the loyal users you have are spending more, your bottom line is still improving.

  • Net Promoter Score: This is how your customers rate your business, and how likely they are to refer their peers and connections to use your services or products. Improvements in this score are also a form of customer growth.

Planhat is a customer success platform which collects data from sources across different departments like sales and marketing to reveal the most current insights into these metrics and trends. It’s our mission to enable transparency that helps you save money and make money at the same time.

Ideal Average Customer Growth Rate

The optimal average customer growth rate is different depending on the stage of the business and the industry where the product offers a solution. Here are the sectors with the highest year-over-year growth rates, according to think tank Equidam:

  • Cyclical consumer products and services like eCommerce have the highest first-year growth rate, sometimes as high as 600% customer growth. By year three, these products may still grow by over 100% depending on popularity.

  • Banking and financial services may also have customer growth topping 160% in the first year of business or solution rollout.

Software and IT appear to be on the lower side of the growth spectrum, but these solutions are also driving products and releases in other economic sectors.

In SaaS startup customer growth as well as in baseball, you may hear conversations about the Mendoza Line. This is a performance standard below which a startup is not attractive to investors, or a batter is not attractive to a professional team. What is the bare minimum growth a SaaS company needs to achieve to “stay in the lineup?” TechCrunch did a great job summarizing this complex idea: we’re going to simplify it even further and say, in SaaS, you want to at least match 80-85% of your growth from the year before. But you should not always expect customer growth to be booming—instead, what you are chasing is customer success and a strong position in the market.

How Do You Find the Growth Rate You Can Manage?

Customer growth happens because you are delivering more value or delivering the same value to more people. But it certainly doesn’t happen by accident, or because only one department did it all alone. Planhat is a solution that helps our partners push the boundaries of growth through a more connected customer success mindset. Our platform integrates data from sources like the CRM or marketing tools and grants a health score for each customer. We make it easy and rewarding to put customer expectations at the core of planning for sales, marketing, and customer success teams, so that everyone is working together to drive revenue.

A good customer growth rate is one where you are growing fast but not compromising on quality or customer experience to do so. What that looks like is different for each business, meaning Planhat is also constructed with very few limits. We offer unlimited seating within the platform and the opportunity to set up your unique customer journey from the get-go. We believe in enabling you to keep doing the same amazing work, and let us reveal the insights you don’t even know your behaviors and wins are hiding. Start your journey today to unleash uncommon customer success by scheduling a demo of Planhat!

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