Year-over-Year Growth (YoY)

YoY

Year-over-year (YoY) growth is the percentage change in a metric compared to the same period in the prior year. It eliminates seasonality and is the standard growth measure for mature businesses, public companies, and annual planning. For SaaS, YoY ARR growth is the key benchmarking metric for fundraising and analyst coverage.

formula.sh

YoY Growth = ((This Year Value − Prior Year Value) ÷ Prior Year Value) × 100

> This Year Value: metric in the current period (e.g., March 2025 MRR)
> Prior Year Value: same metric in the equivalent period one year prior (e.g., March 2024 MRR)
> Same-period comparison eliminates seasonal distortions

example

example.sh

ARR was $800,000 in Q1 last year and $1,400,000 in Q1 this year.

(($1,400,000 − $800,000) ÷ $800,000) × 100

→ 75% YoY ARR growth

why it matters

YoY growth is the gold standard for evaluating SaaS performance because it controls for seasonality and gives a meaningful period-length comparison. A business that grew from $1M to $2M ARR in a year has a 100% YoY growth rate — a number that investors, analysts, and acquirers understand without needing conversion.

The "Rule of 40" — which states that a SaaS company's YoY growth rate plus profit margin should exceed 40% — uses YoY as its growth input. Understanding your YoY growth rate is therefore central to knowing whether you pass the Rule of 40 at any given point in time.

common mistakes

✗Using YoY growth for very early-stage companies where the base is too small — the percentages are misleading

✗Not adjusting for one-time events in the comparison year (a large enterprise deal, a viral moment) that inflate the base

✗Confusing YoY ARR growth with YoY revenue growth — for fast-growing companies, ARR growth leads revenue growth

pro tips

✓Build a 24-month rolling YoY chart — declining YoY growth rate is the first sign of growth ceiling

✓Segment YoY growth by customer tier to see where growth is coming from — SMB vs. mid-market vs. enterprise

✓Report YoY growth to your board with and without the contribution of one large customers to show organic growth rate

the mrrsucks take

Year-over-year growth means you are being compared to yourself from a year ago. If your past self was also broke, this metric has limited diagnostic value.

faq

What YoY ARR growth is expected at different stages?+

At $1M–$5M ARR: 100–200% YoY is strong. At $5M–$20M ARR: 80–150% is expected for venture-backed companies. At $20M–$100M ARR: 50–100% YoY. Below 30% at any growth stage signals stagnation.

When should I use YoY instead of MoM?+

Use YoY for investor reporting, board decks, and annual planning. Use MoM for operational monitoring. YoY is the right lens once you have 12+ months of data.

The $0 MRR milestone›

related metrics

./install-the-daemon

$9. 365 roasts. one public endpoint of pure shame.