Why Compound Growth Changes Everything
The difference between 8% and 12% monthly growth looks small. Over 12 months, 8% MoM takes $50K MRR to $126K. 12% MoM takes the same $50K to $194K. A 4 percentage point difference produces 54% more ARR in 12 months.
This is why early-stage SaaS investors care about MoM growth rate more than absolute ARR. The growth rate is the exponential — it determines where the trajectory lands at Series A, Series B, and beyond.
The Rule of 72
To estimate how long it takes for MRR to double: divide 72 by your monthly growth rate. At 10% MoM, MRR doubles in ~7 months. At 5% MoM, it takes ~14 months. At 20% MoM, it doubles in ~4 months. This rule gives you an intuitive sense of your compounding speed.
Forecasting vs Budgeting
A revenue forecast (this tool) projects future revenue based on current trends. A revenue budget sets a target and works backward to the activities needed to hit it. Use forecasts for investor communications and growth tracking. Use budgets for headcount planning and spend allocation.
The most common forecast error: extrapolating current growth rate without accounting for natural growth deceleration as ARR scales. Growth rates almost always slow as the base grows — model a conservative scenario with a 1–2% MoM growth decay over 12 months.
72/rate
Months to double MRR (Rule of 72)
10%
MoM growth → doubles MRR in ~7 months
200%+
Annualised growth from 10% MoM
15 mo
Average time from seed to $1M ARR for top quartile