SaaStr · 2021-01-20 · 1960d

Lead Velocity Rate (LVR): The Leading Indicator for SaaS Growth

This article argues that Lead Velocity Rate (LVR)—the month-over-month growth rate of qualified leads—is the most important metric for SaaS companies because it predicts future revenue and is a leading indicator unlike sales or pipeline. By targeting LVR growth 10-20% above desired MRR growth targets with a consistent sales team, SaaS companies can reliably forecast revenue 12-18 months in advance and identify systemic problems in sales execution or product quality.

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Metrics in this report

Lead Velocity Rate Growth Target (Early Stage)

10%

monthly

SaaS companies at $1M ARR

Lead Velocity Rate Growth Target (Growth Stage)

8%

monthly

SaaS companies at $3M+ ARR

Required LVR Growth vs. MRR Growth

10-20%

relative differential

LVR should exceed desired MRR growth by this range

Revenue Forecasting Horizon

12-18months

forward-looking

Period of visibility using LVR methodology

Typical SaaS Sales Cycle

12+months

median

Time from initial lead creation to close

Year-over-Year Revenue Growth Target

100%

minimum

Growth target supported by 8% monthly LVR growth