Recurring Revenue and Week Over Week Growth

David Cummings on Startups

Recurring revenue is incredibly powerful for startups. On the Software-as-a-Service (SaaS) front, recurring revenue gets combined with strong gross margins, strong renewal rates (hopefully!), and strong predictability. Only, it’s incredibly difficult to get the engine going. Paul Graham says growth of 5-7% per week is good (see his Growth essay).

Let’s look at how a 5% per week revenue growth rate looks from a base of $5,000:

  • End Year 1 – $63,000 (based on 5,000*1.05^52)
  • End Year 2 – $800,000 (based on 63,000*1.05^52)
  • End Year 3 – $10,100,000 (based on 800,000*1.05^52)

As an example, Pardot’s revenue growth rate was solid, but no where near those numbers. Is 5% per week growth great? Absolutely. Is it realistic after the first year or two? Not likely. Over time the law of large numbers kicks in and growing 5% per week becomes nearly impossible.

Another way to look at it would be start with 5% per…

View original post 104 more words

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s