ARR
Annual Recurring Revenue
Revenue
The annualized value of recurring revenue from subscriptions. Calculated as MRR × 12. A key metric for forecasting and valuation.
What is ARR?
Annual Recurring Revenue (ARR) provides a yearly view of your predictable subscription revenue. It's particularly useful for enterprise SaaS and subscription businesses that deal with annual contracts.
ARR is the go-to metric for investors and stakeholders when evaluating subscription businesses. It smooths out monthly fluctuations and provides a clearer picture of business health.
When to use ARR vs MRR:
- Use ARR when most customers are on annual plans
- Use ARR for investor presentations and valuations
- Use MRR for operational decisions and month-to-month tracking
Formula
ARR = MRR × 12
Example
If your MRR is $50,000, your ARR is $600,000.
Why ARR Matters
ARR is the standard metric for subscription business valuation. Many investors use ARR multiples to determine company worth.
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