The first business has won dozens of small customers, often by discounting heavily. Many of these clients churn within a year. Growth looks fast, but it’s fragile.

The second company has taken a different path. It has won fewer, larger customers, often after a long sales cycle. These customers do not just stay, they expand their contracts over time. Growth looks slower, but it is built on rock rather than sand.

On paper, both businesses look the same. In reality, one is built for the short term and the other is built for the long term.

This is the problem with the way we measure success for fast-growing SaaS businesses.

Measurement shapes behaviour

“What gets measured gets managed” is a famous management phrase. We don’t actually know who it is from (ironically), but it’s a principle that applies in every walk of life.

That is, we only began to tackle carbon emissions once we started measuring our environmental footprint. Road safety improved when we tracked fatalities per mile. Schools raised standards when exam results and attendance were measured consistently.

Metrics do not simply measure progress, they shape behaviour. In business, this is especially true. The choice of what to measure determines how businesses grow, where investment is made, and how the wider market assigns value.

If we measure the wrong thing, we encourage the wrong behaviour.

Why ARR dominates the conversation

In the world of SaaS, Annual Recurring Revenue (ARR) has become the dominant measure. It is simple, easy to explain, and universally understood. A single number that captures the size of the business.

But ARR is also a blunt instrument.

It tells us nothing about the quality of customers, the efficiency of growth, or the sustainability of the business model. It can be achieved by racing to the bottom on price, by signing up small customers who churn quickly, or by heavily discounting, which undermines profitability.

This fixation on ARR is not good for companies or the wider market. It rewards scale without substance. In many ways, it typifies the “growth at any cost” philosophy that businesses have been trying to move away from.

Why ARPA and NRR matters

Average Revenue Per Account (ARPA) is a far more telling measure. ARPA reveals the type of customer being won and whether a company is moving upmarket. A business with rising ARPA is building deeper relationships, providing more value, and capturing larger, more strategic accounts.

ARPA also signals efficiency. Winning one £100,000 account is rarely the same effort as winning ten £10,000 accounts. The larger customer often brings higher lifetime value, lower churn, and stronger reference power.

(As an aside, yes concentration risk is real. Losing a large customer is more painful than losing a small one. But ARPA doesn’t ignore risk - it’s about showing the quality and trajectory of customer relationships).

But try to find any public ARPA numbers. If you have, you’ll realise there aren’t any. This is because, despite its power, companies are not incentivised to share them.

Net Revenue Retention (NRR) is an equally powerful metric. And critically, it’s not just about whether customers stay, it’s also about whether they grow.

A business with an NRR above 100 per cent is adding more revenue from its existing base each year than it loses. This means growth compounds without the same dependency on new sales.

Industry leaders demonstrate what is possible. GitLab has reported an NRR of more than 150%. Snowflake, during its rapid ascent, achieved NRR above 160 per cent. These figures are not simply statistics. They are evidence that customers see increasing value in the product, choose to deepen their commitment, and become more profitable over time.

A high NRR is the ultimate endorsement. It says that the product works, customers are happy, and the business model scales with efficiency.

The cost of ignoring ARPA and NRR

By focusing only on ARR, the market risks celebrating businesses that are weak at their core. Growth built on discounts and churn may impress in the short term, but rarely lasts. Investors pour in capital, employees chase unsustainable targets, and eventually the numbers collapse under their own weight.

The lesson is simple. If we want stronger businesses, we must measure what truly matters. ARR will always have its place. It shows the size of the building. But ARPA and NRR reveal whether the buildings’ foundations are strong enough to support it.

In the end, metrics are not neutral. They shape how leaders lead, how teams behave, and how companies grow. If we continue to ignore ARPA and NRR, we risk encouraging the wrong kind of growth. If we pay attention to them, we can reward sustainable growth that will benefit businesses, investors and the wider market.

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