Mastering SaaS success in 2025: strategies for sustainable growth
In 2025, the Software-as-a-Service (SaaS) landscape looks different. The sluggishness of the last few years may be behind us, but it’s safe to say that the paradigm of ‘growth-at-all-costs’ is too.
For businesses to thrive today they need to balance innovation with operational efficiency. This means putting sustainable growth at the very heart of everything they do, by driving sustained success through customer-centred strategies, leveraging a new wave of artificial intelligence (AI) technology, and actioning data-driven insights.
In combination, these three elements offer founders a framework to achieve long-term competitiveness in a highly dynamic market. In this blog I’ll explore each of them in turn, but first, let’s take a closer look at efficient growth to learn what it means – and how to measure it.
Efficient Growth: Scaling Sustainably
Put simply, efficient growth means scaling operations while maintaining underlying profitability and unit economics.
Instead of pursuing growth-at-all-costs, it means optimising resources and reducing waste to prioritise sustainable expansion. Founders who place a strong emphasis on efficiency give their businesses the resilience and runway to withstand economic fluctuations, see off competition and meet evolving customer demands.
Metrics to Track (and what they tell us):
| Metric | Description | Why it matters | Good Benchmark |
| Customer Acquisition Cost (CAC) | Total cost of acquiring a customer, calculated by dividing total sales & marketing spend by new customers in a period. Often analysed relative to customer lifetime value (LTV). | Helps assess how much is being spent to acquire customers and whether it’s sustainable. | LTV to CAC ratio of 3x is considered ‘good,’ but given the guesswork at play in calculating LTV we prefer to look at CAC in the context of CAC payback (see below). |
| CAC Payback | Measures how long (in months) it takes to recover CAC through the Gross Margin of new and expansion annual recurring revenue (ARR) | Indicates how quickly new customers become profitable. Needs to be analysed alongside retention rates for true efficiency. | 12-15 months for enterprise; <12 months for SME customers. |
| Net Revenue Retention (NRR) | The amount of software or licence ARR generated from customers in the most recent month, divided by the amount of software or licence ARR generated from the same customers 12 months ago | Shows how well a company retains and grows ARR from its existing customer base. | 100%+ is strong; best-in-class SaaS companies achieve 120%+ NRR. |
| Gross Revenue Retention (GRR) | Measures how much ARR is retained from existing customers, excluding expansion revenue from upsells/cross-sells. | Reflects customer retention strength and highlights revenue lost due to churn, downgrades, or contractions. | 80-90% for SMEs; 90%+ for enterprise SaaS. |
| Magic Ratio | Measures sales efficiency – how effectively CAC is converted into net new ARR growth. | Indicates whether a company is growing sustainably or burning too much cash to acquire customers. | >1.0 suggests efficient growth; <0.75 may indicate unsustainable spend. |
| Burn Multiple | Ratio of operating cash flow burned compared to net new ARR growth. | Highlights how much capital a company is using to generate growth, signalling efficiency. | <1x is excellent; 1-1.5x is sustainable; >2x suggests inefficient growth. |
While all of these are useful, it’s the burn multiple, alongside the ‘magic ratio’ (the ratio of CAC to net new ARR) and CAC payback (the length of time it takes to recoup money spent on acquiring a customer) that VCs will look most closely at to confirm that a business is, truly, growing efficiently.
A healthy magic ratio ranges from around 0.8x (for every £1 spent on customer acquisition, 80p is returned in new ARR) for enterprise software businesses, to 1.2x (for every £1 spent, £1.20 is returned) for SME software businesses.
A good burn multiple is as close to 1x as possible – below, ideally. This means that for every £1 burned in cash, the business is making £1 or more in ARR growth; the magic ratio offers a key insight into sales efficiency, but the burn multiple tells the story of how well the business is growing, relative to operating cash flows.
Sustainable growth is the order of the day – and it’s through these metrics that founders can be sure they’re on-track, and VCs (or other investors) will be checking up. But it’s all well and good measuring efficient growth – what actually drives it? Here are a few key strategies:
1. Customer-Centred Strategies: Enhancing Retention & Engagement
SaaS businesses thrive when they focus on delivering exceptional customer experiences. Because customer retention is generally more cost-effective than acquiring new users, founders need to understand it as a critical component of long-term success and put customer satisfaction at the heart of everything they do.
A customer-centric approach, ensuring that customers continually extract value from a SaaS product, fosters brand loyalty and encourages referrals, with a healthy, knock-on impact on CAC.
Metrics to Track:
- Customer Satisfaction Score (CSAT): Measures immediate customer feedback. This metric is based on survey results, with the CSAT calculated from the percentage of customers who express high levels of satisfaction with product.
- Net Promoter Score (NPS): Gauges customer loyalty and likelihood to recommend through a simple survey, with NPS calculated as percentage of detractors (customers unlikely to recommend your company) subtracted from percentage of promoters.
- Average Revenue Per User (ARPU): ARR generated per active user, calculated by dividing total ARR generated by total number of customers.
- Customer Usage Statistics: Usage statistics provide quantitative insights into how customers interact with a product, helping companies evaluate its success, identify pain points and guide improvements. Example metrics include:
– Active Users (Daily, weekly, monthly: DAU, WAU, MAU): Shows how frequently users return.
– Time Spent in Product: Measures stickiness; longer session times suggest a useful or engaging product.
– Feature Adoption Rate: Identifies which features users engage with most (or ignore).
All these metrics offer a deep insight into the customer’s relationship with your business and solution and the ARR they generate. Each of them can be used to tailor strategies to engage customers, powering loyalty and generating referrals. In the pursuit of efficient growth, founders need to have a granular understanding of how their customers experience their start-up.
2. Harnessing AI: Driving Automation & Intelligence
AI is powering change across industries, and B2B SaaS is no exception. Next-generation automation, enhanced personalisation and improved decision making are just a few of the transformations being wrought by the technology, and for founders able to harness it the benefits and opportunities for sustainable growth are huge.
Founders able to integrate AI effectively into their SaaS businesses’ operations can enhance efficiency, improve customer support and obtain far deeper insights into user behaviour. AI-driven tools allow SaaS businesses to predict trends, optimise resources and provide more relevant customer experiences, making them more competitive in the market.
Metrics to Track:
- AI Adoption Rate: Percentage of users leveraging AI-powered features. This measures user engagement with AI functionalities.
- Customer Support Response Time: Improvement in resolution times with AI support
- Automation Rate: Percentage of workflows or decisions automated by AI. This reflects AI’s impact on efficiency and cost savings.
AI’s full impact is yet to be felt. With new solutions entering the market daily, it can be hard for founders to cut through the noise and find the ones they need to drive efficient growth in their organisation.
At Board level we are recommending that all of our portfolio companies internally track how they are using AI, either for new product development or to make the business more efficient.
We’ll be exploring this question further in a forthcoming blog when we’ll be taking a closer look at the impact of AI on SaaS – so watch this space!
3. Leveraging Data-Driven Insights: Making Informed Decisions
Data is a crucial asset for SaaS companies, providing the foundation for strategic decision-making. As my colleague, Constanza Diaz, wrote at the start of the year, we’re anticipating a renewed emphasis on the data tech stack, courtesy of its role in maximising the potential of AI solutions. But there are longer-standing reasons than this for keeping on top of data.
Founders able to effectively harness their businesses’ data can anticipate customer needs, optimise pricing models and refine their product offerings. In an increasingly competitive landscape, data gives pioneering founders the information they need to make the right decisions: to refine marketing strategies and pivot as necessary to maintain a competitive edge. Based on these data, founders can make the right decisions at the right time, opening a strategic path to efficient growth.
Final Thoughts
Success in SaaS walks a fine line, the tightrope between innovation and efficiency. Pioneering solutions aren’t enough: if founders hope to change the world, they need to build efficiency into their operations and grow sustainably. It’s the only way they’ll see their solution reach the hands of all who need it.
Enhancing customer experience, justifying loyalty and encouraging referrals; harnessing the power of AI to achieve efficiencies through automation; data-driven decision-making. These are key strategies through which founders can remain competitive in a highly dynamic market.
Tracking the right metrics ensures that these strategies translate into measurable success and gives founders the insights they need to iterate and fine-tune. By continuously refining these approaches, SaaS companies can build long-term resilience and profitability in an ever evolving market.
If you’re scaling efficiently and have a solution you think we should know about – get in touch. You can find out more about pitching to us, as well as a host of other indispensable material
