Why I stopped talking about growth in percentages
+40% growth on €400k ARR = €13k/month in new revenue. Nice momentum. But does it fund a team? Here's the metric that replaces growth rate.
There’s a conversation I’ve had dozens of times with founders, investors, and sales teams. It goes like this:
“We’re growing 40% this year.” “Good. What’s your ARR?” “€400k.”
And me, doing the math: €400k at 40% = €160k in additional revenue for the year. That’s €13k per month.
It’s great momentum. But if we’re talking real business impact — the ability to fund a team, sustain a roadmap, convince a strategic partner — that’s a different conversation.
This isn’t a judgment. It’s a metrics problem.
The growth rate trap
The percentage growth rate is the most widely used and most misleading metric in SaaS.
Here’s why.
A company at €100k MRR growing 30% generates €30k of new MRR per year. About €2,500/month.
A company at €1M MRR growing 15% generates €150k of new MRR per year. That’s €12,500/month.
The first one is “growing twice as fast” by rate. The second one generates five times more absolute value every month.
Comparing these two companies on growth rate is meaningless. But it’s what we do constantly — in investor pitches, in industry benchmarks, in founder-to-founder conversations.
How it cost me bad decisions
At Sortlist, we steered by growth rates for a long time. When rates slowed, it was a red flag. When they picked up, it was a win.
The problem: as we grew, the same efforts produced lower rates even when the absolute value created was higher. A period of +€50k in new MRR when you’re at €500k is +10%. The same result at €800k is +6.25%. The team sees a slowdown. In reality, performance is identical.
Conversely, a few months after strong absolute growth, rates on the larger base looked “normal” even when efforts were less intense.
This confusion between rate and absolute value creates false signals in every direction — and management decisions that respond to the false signals rather than operational reality.
We lived this during the post-Series B growth phase. Monthly rates appeared stable while the gap between what we were generating and what we were spending was silently widening.
The right metric: Net MRR in absolute euros
When I decided to build a fractional consulting model for SaaS CEOs and founders, I needed a performance metric that was both honest and comparable regardless of client company size.
Growth in % doesn’t work: it favors small bases and penalizes large ones.
Absolute MRR doesn’t work as a performance metric either: it captures the stock, not the flow.
The answer: Net MRR added in absolute euros per month (or per quarter).
Net MRR = New MRR + Expansion MRR − Churn MRR − Contraction MRR.
In euros, not percentages.
This metric says one thing: by how much did the recurring value of the business increase this month, in real money?
It’s independent of the base. It’s comparable across companies, across months, across teams. And it doesn’t lie.
What it changes in investor conversations
VCs love growth rates because that’s what their valuation models consume. An early-stage investor thinks in ARR multiples, and the growth rate validates the multiple.
But in growth or late stage, what actually matters is the trajectory in absolute value. Is the growth engine producing more revenue each month? At what pace? With what consistency?
I’ve sat through boards where we presented “+X% YoY growth” and everyone nodded. When I started presenting “€Y of Net MRR added per month on average this quarter, versus €Z last quarter,” the conversations became far more operational.
Because a euro amount, everyone understands what that means in terms of possible hires, runway, marketing investment capacity. A rate is an abstraction.
Practical application
If you want to adopt this in your business:
Build a simple table with four rows per month: New MRR (new clients), Expansion MRR (upsell/cross-sell on existing), Contraction MRR (downgrades), Churn MRR (cancellations). The sum gives you your monthly Net MRR.
Track the trend on a 3-month rolling basis. One month is noise. Three months start to be a signal.
Break it down by segment. Overall Net MRR can mask a healthy dynamic in one segment and a catastrophic one in another. At Sortlist, growth from the new model was hiding accelerating churn from legacy subscribers for months. We saw a “stable” rate. In reality, two opposing dynamics were canceling each other out.
Only compare your % growth with strictly comparable companies — same base size, same maturity, same segment. Otherwise you’re comparing car speeds with bicycle speeds.
A note on industry benchmarks
The famous benchmarks — “a good SaaS company should do +100% ARR at €1M, +50% at €5M, +30% beyond” — are useful as rough guides in an investor conversation.
They’re useless as internal steering tools.
Your team can’t optimize a % growth rate. They can optimize a new client pipeline, an expansion rate on existing accounts, a churn rate. These levers produce absolute value. Absolute value generates a rate. The rate is an output, not a cause.
Steer the causes. Measure in euros.
Thibaut Vanderhofstadt
11 years as B2B scale-up CEO (€10M ARR, 9 markets, 3 M&A). Fractional consultant for post-funding founders.