Maxio Institute Report

The Growth State of B2B SaaS Businesses in June 2024

According to the anonymous billing and pricing data from Maxio, the average growth rate across our customer base has improved to 19% in Q1 2024 from 15% in Q4 2023. In this report, we’ll delve into who is experiencing this positive trend, based on pricing model, size, and industry, and which are still struggling.

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Table of Contents

  • The State of the B2B SaaS Market
  • Consumption vs. Subscription Pricing Models at B2B SaaS Companies Below $1MM in Revenue
  • Consumption vs. Subscription Pricing Models at B2B SaaS Companies Above $1MM in Revenue
  • Growth Rates by Company Size
  • Industry Analysis
  • Industries Booming in Q1 2024
  • Industries Struggling in Q1 2024

The State of the B2B SaaS Market

Chart of the average growth rates of b2b SaaS according to Maxio institute June report

2024 has brought a complex and somewhat contradictory economic landscape. On one hand, the labor market has proven surprisingly resilient, with unemployment rates remaining remarkably low. The robust employment situation contributes to strong consumer spending and economic stability. However, the specter of persistent inflation looms large, eroding purchasing power and prompting central banks to maintain elevated interest rates. These high interest rates, while intended to curb inflation, are also placing a significant burden on borrowers, increasing the cost of capital for businesses and consumers alike.

In the B2B sector, this economic duality is reflected in a similar divergence of outcomes. Our data reveals that while the overall average growth rate for all B2B SaaS companies has experienced an uptick (from 15% in Q4 2023 to 19% in Q1 2024), a closer examination reveals a more nuanced picture. The overall growth is primarily attributable to the improved performance of smaller businesses, specifically those with annual revenues under $1 million.

Chart of average growth rates of B2B Subscription companies comparing consumption pricing and subscription pricing

The Current State of SaaS Growth

In this report, we present an update on the overall state of today’s B2B subscription marketplace based on the actual billing data of 2,400 B2B SaaS companies. We discuss:

  • We may be emerging from the B2B SaaS recession, with the average growth rate across our customer base improving to 19% in Q1 2024.
  • Much of the observed growth is driven by companies with under $1MM in annual revenue.
  • Larger companies with consumption billing models showed increasing growth rates, indicating a preference for variable, consumption-based investments during economic uncertainty.

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About the Maxio Institute

The Maxio Institute is a research arm of Maxio, the #1 billing and financial operations platform for B2B SaaS businesses. Through our work with over 2,000 subscription businesses, we’re uniquely positioned to provide data-backed insights and benchmarks. Our goal is to help B2B SaaS businesses of all sizes gain an accurate picture of the current market, so they can make informed decisions about their future.

Uncover key industry insights

Dive into comprehensive performance metrics from nearly 1,000 B2B SaaS companies. This year’s report reveals important trends in decreasing revenue growth efficiency for 2023, analyzing metrics like the Blended CAC Ratio, New CAC Ratio, CAC Payback Period, and Net Revenue Retention. Learn how reduced Sales and Marketing expenses influenced overall growth rates.

Why this report matters:

  • Data-driven benchmarks. Leverage reliable benchmarks derived from a significant collection of performance metrics, ensuring an accurate evaluation of your company’s performance.
  • Customizable insights. Filter benchmarks by company size, annual contract value, go-to-market motion, pricing model, target customer segment, product category, and region for tailored insights.
  • Analyze revenue trends. Identify areas for improvement with detailed analyses of revenue growth efficiency trends in 2023.
    Plan for future growth. Despite lower growth rates in 2023, the SaaS industry is poised for higher growth in 2024. Use this positive outlook to shape your future growth strategies.
  • Strategic recommendations. Apply these insights to your strategic planning for improved performance and more efficient revenue growth.

Don’t miss out on the critical insights and strategies that will drive your company’s efficient and sustainable growth.

Maxio Institute Report

The Growth State of B2B SaaS Businesses in January 2024

Growth rates seem to have steadied throughout 2023—but what that means for each business is a little different. In this report, we dig into the “new normal” for businesses based on billing type, size, region, and—new to this report—industry.

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Table of contents

  • Part 1: The state of B2B subscription growth
  • Part 2: Consumption vs invoicing companies
  • Part 3: Growth by size
  • Part 4: Growth by industry
  • Part 5: Growth by US region
  • Key takeaways

Part I: The state of B2B subscription growth

B2B businesses’ growth rates seem to have steadied throughout 2023. While we observed modest improvement in growth rates throughout Q2 and Q3 of 2023, growth rates for subscription businesses processing up to $100MM leveled off and slightly declined to finish the year at 14% growth in Q4, a 6% decline from the same period in Q4 2022.

A chart showing the growth rates for B2B subscription companies processing ><$1MM in annual billings

During the Federal Reserve’s most recent meeting, it was noted “recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter.” Our analysis suggests the growth rates observed throughout 2023 are here to stay for the foreseeable future. We believe the market is returning back to normalized growth levels after experiencing a period of abnormal growth and fluctuation. This period of abnormal growth continues to weigh heavily throughout the private technology and subscription sectors.

As PitchBook observed in their Q3 2023 Venture Monitor, “More companies are taking bridge, continuation, or down rounds; inside rounds are at multi-year highs; and there are fewer rounds with a new lead investor obtaining a board seat than at any time in at least a decade. Investors and founders alike are optimizing for stability and cash flow to meet the challenges of the current market.” If businesses have not yet reoriented around cash-efficient growth, it may be too late. You might be forced to raise capital just to keep the lights on.

Declining growth rates are weighing on investors’ ability to effectively deploy capital raised in the last three years. Some VC/PE firms have paused investing in new funds, as OpenView observed in December, and we would not be surprised to see others potentially return capital to investors beginning in 2024, a trend last broadly observed in 2008/2009.

The quantity of deals is the lowest it has been since 2016, and we expect this trend to continue at depressed (or, rather, normalized) levels. The bar for receiving investment remains high, or at the very least, expensive, if you lack high growth and favorable unit economics.

OpenView's chart showing company deal value vs deal count from 2015 to 2023

The remainder of this report walks through key findings from our analysis of more than 2,400 B2B SaaS companies, representing $15B in annualized volume over the last 24 months. We’ll dive deeper into notable growth insights based on:

  • Billing type
  • Industry
  • Size
  • Region

The State of SaaS Growth 2024

In this report, we present an update on the overall state of today’s B2B subscription marketplace based on the actual billing data of 2,400 B2B SaaS companies. We discuss:

  • The general return to normalized growth levels in 2023
  • The differences in “normalized” growth rates for each industry, including which industries grew the most and which proved “recession-proof”
  • The impact of billing model on company growth from $0-$1MM, and then to $100MM

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About the Maxio Institute

The Maxio Institute is a research arm of Maxio, the #1 billing and financial operations platform for B2B SaaS businesses. Through our work with over 2,000 subscription businesses, we’re uniquely positioned to provide data-backed insights and benchmarks. Our goal is to help B2B SaaS businesses of all sizes gain an accurate picture of the current market, so they can make informed decisions about their future.

Webinar

Insights from Maxio Institute’s 2024 Growth Index Report

We analyzed billing data from 2,400 B2B SaaS companies to uncover current market trends. Join us for an exclusive first look at our newest Maxio Institute report, and learn what these findings mean for B2B SaaS in 2024.

Aired January 17, 2024

Featuring: Ray Rike, Jon Cochrane, Hillary Frost

Watch the webinar recording now

Join B2B SaaS experts as they explore the resilient growth of B2B subscription businesses amidst economic uncertainties. As we transition from the era of “growth at all costs” to “efficient growth,” discover how your company can not just weather the storm, but emerge stronger.

This webinar is now available for CPE credit on Earmark.

Speakers

Ray Rike
Founder and CEO, Benchmarkit
LinkedIn
Jon Cochrane
VP of Strategy and Director of Maxio Institute, Maxio
LinkedIn
Hillary Frost
Senior Strategy Manager, Maxio
LinkedIn

Earmark CPE is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.NASBARegistry.org.

2023 Maxio Institute Report

Consumption companies continue to see raising growth rates into 2024

In our 1H 2023 report, we observed an encouraging increase in the annualized growth rates for B2B subscription businesses in Q2 vs. Q1 2023. As a whole, we’ve observed a steadying of growth rates in Q3 with average annualized growth rates for subscription businesses processing between $0 to $100MM averaging 15%, a 2% increase from the same period in Q3 2022.

Maxio Institute Chart_Average growth rates by B2B Subscription Companies Segmented

As we predicted in our 1H report, invoicing oriented businesses have not returned to the growth rates experienced in 2022 and declined 2% from Q1 2023. By contrast, consumption businesses have experienced two consecutive quarters of growth rising a total of 5% from Q1 2023.

 

Maxio Institute_Average growth rates of B2B subscription companies segmented by GTM motion

An area we highlighted in our 1H report, there is a stark contrast between companies processing less than $1MM in billings vs. those above $1MM. We suggested for a subscription business to break past $1MM in billings most will need a pricing package with a firm contract and predictable invoicing schedule. This trend remains true based on our analysis of companies processing <$1MM in billings. Annualized growth rates for invoicing businesses under $1MM continue to outpace their consumption oriented counterparts by nearly 40%.

Maxio Institute_Average growth rates of B2B subscription companies segmented by GTM motion_2

Once you pass $1MM in annualized billings, you may need to pause and ask, what is the right pricing model to get to the next phase of growth? Do you lean towards predictable revenue by signing customers up for 12+ month subscriptions with predictable invoicing schedules or embrace a consumption-oriented model? The answer lies in aligning pricing and packaging to the value your customers receive from your product; however, whatever you decide will have implications on your ability to respond to shifting headwinds or tailwinds in the broader market.

This dilemma is playing out in our analysis of businesses processing between $1 and $100MM in billings. As we highlighted in our 1H report, invoicing companies were less impacted by the market headwinds in 2022 as many contracts extend for 12+ months. The headwinds have finally caught up with invoicing businesses and growth remains 8% lower from Q3 2022.

The cloudy skies hovering over consumption businesses may finally be parting. These businesses have experienced two consecutive quarters of growth and are up 3% from Q3 2022. YTD, consumption businesses have increased 5% YTD vs. invoicing businesses who have experienced a 2% decline from the start of the year.

Maxio Institute_Average growth rates of B2B subscription companies segmented by GTM motion_3

The positive movement in consumption growth rates may point to better days for invoicing businesses beginning as soon as Q4 2023.

Stay tuned for another update coming at the beginning of 2024. Until then, check out our 1H report below.


How we analyze our data

The Maxio Growth Index analyzes anonymized year-over-year (YoY) customer billing data from Maxio, a billing and financial operations platform for B2B SaaS, which currently processes over $14B in billing and invoicing data annually. Maxio has over 2,300 customers, most of which are VC- or PE-backed software-as-a-service (SaaS) companies with revenue between $0MM and $100M.

We continue to refine our methodology for how we analyze our data. Following the release of our inaugural and 1H 2023 reports, we’ve made the following refinements to our filtering criteria for analyses:

  1. Reduced our quarterly flux threshold to remove companies who have positive or negative growth rates in excess of 100% (previously 200%).
  2. Added refined filters to remove companies in process of migrating on or off of the Maxio platform.
  3. Increased the threshold for what constitutes an “active” customer from greater than $0 to greater than $50k in total billings a given quarter.

How we calculate YoY growth rates

We take growth in TTM billings, or revenue, at the end of a quarter (e.g. 6/30/23) vs the prior quarter (e.g. 3/31/23) and multiply by 4 to calculate our annualized growth rate.

((Q2 revenue – Q1 revenue) – 1) x 4 = Annualized Growth Rate

How we determine whether to use billings or revenue

Consumption based companies: TTM billings

Consumption-based companies typically have monthly-based measurement and billing. Adding the sum of all invoices sent over the last 12 months, most times, is the best way to estimate the annualized revenue of one of these companies.

Subscription invoicing companies: TTM revenue

Subscription invoicing companies often have pre-negotiated terms (often 1–3 years) and billing schedules. Using revenue instead of billings allows us to remove significant fluctuations in the underlying data which might be caused by an annual invoice or subscription paid up front.

How we filter out anomalies

We remove customers who:

  • Have quarterly growth rates greater than 100% or less than -100%, or
  • Were inactive at the beginning or end of a quarter (we consider a customer active if they have at least $50k in billings or revenue in a quarter), or
  • Were in the process of ramping volume onto, or off of, the Maxio platform

 

The State of SaaS Growth 2023

We’ve analyzed the billing data of over 2,100 B2B SaaS companies between 2022 and 2023 and have presented key insights, including:

  • Growth rates of businesses based on billing type
  • Where some of the fastest growing companies are located
  • The bar for raising your successive round of investment.

Download the report

Webinar

B2B SaaS Benchmarks: Summer 2023

We’ve analyzed data from thousands of B2B SaaS companies to uncover current market trends. Join us as Maxio, Benchmarkit, and The SaaS CFO discuss the findings and what they mean for your business.

Originally aired: August 31

On this webinar, we discussed:

  • Company growth rate trends
  • Customer acquisition cost metrics
  • Customer retention and expansion metrics
  • Departmental expense benchmarks
  • Rule of 40 benchmarks
  • Impact on enterprise valuation multiples

Meet your hosts

Randy Wootton
CEO, Maxio
LinkedIn
Ray Rike
Founder and CEO, Benchmarkit
LinkedIn
Ben Murray
Founder, The SaaS CFO
LinkedIn

2023 Maxio Institute Report

The Growth State for B2B Subscription Businesses

We’ve analyzed the billing data of over 2,100 B2B SaaS companies between 2022 and 2023 and have presented key insights, including growth rates of businesses based on billing type, where some of the fastest growing companies are located, and the bar for raising your successive round of investment.

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Table of Contents

Part I: The state of B2B subscription growth

Part II: Consumption vs invoicing companies

Part III: Growth by size

  • Annualized growth rate by cohort
  • How to break break past $1MM in recurring billings
  • The best (90th percentile) vs the rest (50th percentile)

Part IV: Growth by region

  • East Coast, West Coast, or Midwest?

Part V: Growth by funding

  • What it takes to get funded and stay funded

The state of B2B subscription growth

B2B subscription businesses continue to display resilience in the face of a challenging economic environment. Despite tightened access to capital, B2B subscription businesses have continued to grow since the beginning of 2022s, averaging 10-15% YoY growth throughout the first two quarters of 2023.

While this continued growth is encouraging, it’s still a large decline from the growth rates experienced in 2021 and 2022 amid a period of unprecedented stimulus programs and soaring valuations. The decline in growth has driven a shift from “growth at all costs” to “efficient growth” as access to capital at desirable valuations is no longer an easy task.

According to the pitchbook venture monitor report, the median price-to-sales multiples for VC-backed public companies between 2010 and 2023  was 10.0x. This was largely driven by the valuations in 2021 (~20.0x) and into the first half of 2022 (~10.0x). However, the economic outlook in 2023 is significantly lower with the average valuation standing around 5.0x, a 75% decline from the average valuations seen in 2021.

While we believe the current economic state is here to stay for the next 12 months (at least), we’re confident B2B companies can weather this period of economic uncertainty if they are able to manage their cash positions.

The following report walks through key findings from our analysis of more than 2,100 B2B SaaS companies over the past 18 months. We’ll analyze notable growth differences between businesses based on:

  • Billing type
  • Size
  • U.S region
  • Funding stage

Want more? Download the full report using the form below.

The State of SaaS Growth 2023

We’ve analyzed the billing data of over 2,100 B2B SaaS companies between 2022 and 2023 and have presented key insights, including:

  • Growth rates of businesses based on billing type
  • Where some of the fastest growing companies are located
  • The bar for raising your successive round of investment.

Download the report

About the Maxio Institute

The Maxio Institute is a research arm of Maxio, the #1 billing and financial operations platform for B2B SaaS businesses. Through our work with over 2,000 subscription businesses, we’re uniquely positioned to provide data-backed insights and benchmarks. Our goal is to help B2B SaaS businesses of all sizes gain an accurate picture of the current market, so they can make informed decisions about their future.

Benchmarking Report

2023 B2B SaaS Metrics Benchmarks Report

Benchmarkit (previously RevOps Squared) studied the performance data of over 1,800 B2B SaaS companies in 2022. Download the report to see how the market has been trending, or use the tool below to benchmark against other companies in your cohort.

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Compare your company to your peers

This tool allows you to explore the data gathered in the 2023 survey. Use the “Enter your data” button to quickly compare your company to your peers and use the “Download” button to save your personalized report for later use.

Q2 2023

Benchmarking Growth Rates for B2B SaaS

The Maxio Growth Index analyzes anonymized year-over-year customer billing data from the Maxio financial operations platform, which currently processes over $13B in billing and invoicing data annually. Maxio has over 2,000 customers, most of which are VC- or PE-backed software-as-a-service (SaaS) companies with revenue between $1M and $100M.

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The Maxio Growth Index report reveals that B2B software companies appear remarkably resilient in the face of current economic headwinds. Of the companies analyzed in this study that process $1M or more in annual billings, 82% grew year-over-year from 2021 to 2022.

However, growth rates for most companies declined over the course of 2022, with a substantial drop-off in December. This trend can be attributed to ongoing macroeconomic uncertainty and cooling technology markets, compounded with increased customer churn around end-of-year renewal dates.

Charts showing the 2022 growth rates in consumption and subscription-based businesses from $0MM to $100MM in annualized recurring revenue.

Pricing models impact growth rate

Different pricing models appear to have had an outsized impact on the growth rate of SaaS companies in 2022. Maxio customers with a consumption (aka usage) model often used by  product-led growth (PLG) companies saw a more pronounced growth-rate slowdown, with a 9.2% average decline between 2021 and 2022.

By comparison, customers who use subscription invoicing, which often has a more traditional high-touch sales-negotiated motion, only saw a 0.5% average decline over the same period.

Three charts showcasing the changes in growth rates for B2B SaaS businesses from Q1 to Q4 2022.

One of the benefits of usage-based pricing for SaaS companies is that when a customer grows and uses the software more, the SaaS company receives an immediate uptick in its monthly billings. However, when customer growth slows or reverses, companies leveraging usage-based pricing can be exposed to a contraction in their recurring billings, sometimes unexpectedly.

On the other hand, companies offering traditional, subscription-based pricing models see the inverse trend, enjoying stability and predictability in billings but limited upside if customers grow or expand usage before the contract expiration.

Contract length impacts churn

This delta between the two types of pricing models is also influenced by the terms of the vendor agreements, according to Jon Cochrane, director of the Maxio Institute, the research arm of Maxio that produced the Growth Index. “The stark difference in growth rates for these cohorts ties back directly to different agreement types,” Jon explained. “Companies with consumption-based pricing models tend to offer month-to-month agreements, whereas subscription-invoicing companies tend to have longer-term agreements of a year or more, with predictable billing schedules.”

Two bar charts contrasting the growth rates of B2B SaaS companies based on billing type.

Jon continued, “As the year progresses, we will likely see additional churn in companies with sales-negotiated contracts as their customers come up for renewal. We expect this to normalize the discrepancy we’re seeing in growth rates between the consumption and subscription-driven companies using our platform today.”

 

Additional key findings

Additional key findings from the Q1 2023 Growth Index report include:

  • Mid-market self-service companies—those who process $10-20MM annually—saw the most significant drop in growth between Q1 and Q4 at a 39% decline. By comparison, this same cohort for contract-driven companies saw a decline of just 3.6%.
  • Once businesses exceed $1M in revenue, it appears they become more resilient in the face of economic headwinds. Specifically, according to the analysis, ~82% of businesses above $1MM experienced YoY growth vs. only 67% when you include the <$1MM cohort.
  • The earliest stage businesses (those with annualized billings or revenue <$1MM) struggle disproportionately to those >$1MM.

Methodology

The Maxio Growth Index analyzes the anonymized billing data of over 2,000 Maxio customers from December 2021 to December 2022. The Index is segmented into eight cohorts based on customer billing volume, between <$1M to $100M+ in annual billing revenue. The Maxio Institute used the following criteria in its analyses:

  • Cohorts for consumption billing companies were determined using trailing-twelve-month (TTM) billings on 12/31/22.
  • Cohorts for subscription invoicing companies were determined using TTM revenue on 12/31/222.
  • Companies needed their TTM billings or TTM revenue to be greater than $0 at the beginning and end of a period to be included.
  • Outliers who had fluctuations greater than 500% or less than -500% during this time period were excluded.

Benchmarking Report

SaaS Operations Tech Stack Survey

What technology do SaaS companies use to stay on top of their financials? The SaaS CFO surveyed SaaS leaders to find out.

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What’s inside

In his 4th annual report, The SaaS CFO Ben Murray surveyed 393 SaaS leaders of $1M to $50M+ ARR companies to learn to learn what software they’re using for:

  • Core accounting
  • Invoicing
  • Revenue recognition
  • Sales tax
  • CRM
  • And 14 other categories

Now more than ever, it’s important to have accurate and timely financial and operational numbers. See how companies are using Maxio and others to get their critical data.

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