Blog
AI technical debt keeps growing
The SaaS growth ceiling: how churn and pricing shape growth
6 min 
Share:
AI summary:
Growth initially feels predictable at many SaaS companies. At some point, however, revenue levels off even though the team works just as hard, or harder. The usual response is to invest in acquisition: more advertising budget, sales capacity and lead generation. Yet retaining existing customers is often the real challenge. When users leave consistently, a SaaS growth ceiling forms. New customers mainly replace those who leave instead of creating net growth. The ceiling is therefore both a commercial and a product question: does your product keep delivering enough value for customers to stay?
In this article
Churn rate, Max MRR and the growth ceiling
The mechanism is straightforward in a simplified model. An acquisition channel brings in a roughly constant amount of new monthly recurring revenue. Churn, by contrast, is a percentage of the existing revenue base, so the absolute amount lost grows as the business grows. A few per cent of monthly churn may seem manageable in a small company, but represents a larger revenue loss as the customer base expands. Eventually, revenue lost through cancellations equals the new revenue arriving. This is the SaaS growth ceiling: new revenue replaces what leaves, and net growth stops.
You can estimate this point by dividing new MRR added each month by the monthly revenue churn rate, expressed as a decimal. The result is often called Max MRR: the monthly recurring revenue a company approaches if acquisition and revenue churn remain constant. This simplified calculation excludes expansion revenue and assumes a stable churn rate. Use revenue churn rather than customer churn when customers have different subscription values.
For decision-makers, the estimate makes the problem tangible. A growth problem is not automatically an acquisition problem. It may be about the product’s ability to keep providing value. Revenue from new customers and upgrades can rise while cancellations and downgrades grow faster in proportion. Revenue then appears stable, even though much more is happening underneath.
Tracking estimated Max MRR alongside your monthly revenue report can reveal the effect of changing churn before it fully appears in actual revenue. Reducing churn from 5% to 4%, for example, raises the estimated ceiling by 25% with the same new MRR. Actual revenue moves towards it gradually. The reverse also holds: rising churn lowers the ceiling immediately, even if revenue is still growing. The estimate provides an earlier signal than the revenue line alone.
Revenue loss and recovery
A persistent misconception is that revenue growth automatically accelerates when a company brings in more customers. That only works when it retains enough of its existing customer base. As new revenue increases month after month, the absolute loss through cancellations can also rise over time if the churn rate stays the same. Lower churn may therefore be necessary to turn a growing inflow into faster net growth. The question shifts from “How do we acquire more customers?” to “Why do existing customers leave, and what role does the product play?”
Looking mainly at Net Revenue Retention creates a similar risk. NRR measures how revenue from an existing customer cohort changes through upgrades, cancellations and downgrades. A figure above 100% looks reassuring, but does not tell you how many customers left during the same period. Revenue loss and recovery are not symmetrical either: after a 20% decline, a 25% increase is needed to return to the original level. Healthy NRR is a useful part of the picture, but does not replace tracking customer departures. Combining revenue retention, customer retention and product usage helps explain what is actually slowing growth.
Why a cancellation reason may not reveal the real cause
Many SaaS companies record cancellation reasons through a short form with a limited set of options: price, a project ending or a missing feature. When cancelling, customers do not always identify what went wrong earlier in their journey. They may select “too expensive” when the underlying problem is that the value they experience no longer justifies the price. They previously saw, accepted and paid that price. Behind “too expensive” may sit a feature that failed to meet expectations, a missing integration or onboarding that never made the product’s value clear.
How you ask also influences the answer. “Why did you cancel?” tends to produce a reason. “What led you to cancel?” creates more space to understand the experiences behind the decision. A conversation can reveal more than a form someone rushes through.
Do not wait until a customer cancels. Look earlier for signs of limited value: little use of core features, frequent support requests or colleagues never being invited. Combine usage data, conversations and UX research, with AI-supported analysis where appropriate, to understand where and why users drop out. When this happens early, better onboarding is not automatically the answer. First establish where the friction lies and which value users are missing. This is where product discovery and UX research help, as we discuss in the difference between product and software development (article in Dutch).
“A lower churn rate rarely makes a spectacular story. It is usually the least visible work, yet it can have the greatest financial effect.”
Pricing and audience: who is the product for?
A common assumption is that a lower price almost always brings more customers. In B2B, the relationship is more nuanced. A low price can make a buyer question a product’s maturity, while a higher price may suggest reliability and professionalism when its value is clear. Pricing consistently too low can also attract customers focused mainly on cost who are less loyal when an alternative appears. Pricing strategy deserves regular attention as the product and market evolve. Our interview with pricing expert Johan Maessen explores this further.
Pricing is closely connected to who the product is intended for. Cancellations and price discussions can signal that the product has tried to serve too broad an audience with different expectations and needs. A team that deliberately chooses a segment with specific requirements for features, support or integrations can build a better fit for that group. Segmentation, audience selection and positioning belong in a Go-To-Market strategy, rather than being resolved through price discussions after the fact.
What this requires from UX, engineering and the product team
Breaking through the SaaS growth ceiling means looking beyond marketing and sales. UX research reveals where users get stuck. Technical architecture needs to grow without making every extension slower. The product team should regularly check whether the website’s promises match users’ daily experience.
Unpredictable architecture, technical debt and outdated documentation create the friction that makes customers leave quietly, often without filing a complaint. At GlobalOrange, our GOdna approach starts with scalability, maintainability and transferability, so the product is prepared for growth. A software audit gives companies an independent, concrete starting point for assessing whether their existing technical foundation can support it.
“When growth stalls, the instinct is to look at marketing first. But the explanation regularly lies in the product itself: where users drop out, and why.”
Whether an organisation makes these improvements with its own team or through a hybrid partnership depends on its stage and existing in-house expertise. We discuss this further in in-house versus hybrid SaaS development teams (article in Dutch). More important than the exact arrangement is the discipline to measure what actually affects churn rather than relying on a general sense of customer satisfaction.
The first step
A growth ceiling often appears as a flat revenue line rather than falling revenue, while the effort behind it keeps increasing. That is the time to look beyond the next marketing budget: where do customers actually drop out, does pricing still fit the value delivered, and does the technical foundation support growth or hold it back?
Our Digital Strategy Sprint helps clarify this in two weeks. You identify the growth ceiling, the factors behind it and the next steps likely to make the greatest difference. The result is a practical, actionable plan.
Scalability as a foundation for client growth
Urban Gym Group illustrates how subscription behaviour directly affects revenue. Its fitness brands depend on recurring memberships. Bringing three brands onto one scalable technical platform created opportunities to streamline processes and improve the experience across brands, rather than maintain three separate ageing systems. That scalability provides a foundation for improving retention and growth without each change hitting the limits of the existing platform.
Frequently asked questions about the SaaS growth ceiling
Is churn or insufficient acquisition causing our growth problem?
In a simplified model, divide new MRR added each month by the monthly revenue churn rate, expressed as a decimal. If this estimated ceiling is close to current MRR, churn may be a major constraint even when acquisition performs well. Check expansion revenue, differences between customer segments and the stability of your assumptions before drawing a conclusion.
Is raising prices risky when customers may already leave?
It can be. Customers who see limited value may be more likely to leave, while customers who clearly experience the value can be more willing to pay a price that reflects it. Assess willingness to pay and retention by segment, test the change and communicate the value clearly.
What data do I need to analyse this?
Start with new recurring revenue, revenue and customer churn by segment, and usage in the first weeks after signup. More advanced tooling can deepen the analysis, but is not required to identify initial patterns.
Should we start with technology or positioning?
That depends on where customers actually get stuck. An independent assessment of the product, technology and customer behaviour usually helps identify which area has the greatest impact now.
How do churn and pricing affect your growth ceiling?
Our Digital Strategy Sprint gives you clarity within two weeks about the steps likely to make the greatest difference.
- Use our contact form
- Call +31 20 420 4307
- Book a conversation with Yvo
Share: