Annual Recurring Revenue (ARR)

ARR is MRR × 12 (with caveats). Learn what ARR means, how to compute it, and pitfalls.

annual recurring revenueARR definitionARR vs MRRcalculate ARR

Definition

Annual Recurring Revenue (ARR) is the normalized annual value of recurring subscription revenue.

Answer-first summary

Annual Recurring Revenue (ARR): Annual Recurring Revenue (ARR) is the normalized annual value of recurring subscription revenue.

Formula

ARR

ARR = MRR × 12

  • MRR: Monthly recurring revenue (normalized)

MRR $100k → ARR $1.2M.

How to improve

  • Grow net new MRR and reduce churn.
  • Increase expansion revenue.

Common pitfalls

  • Treating bookings as ARR.
  • Counting non-recurring fees.
  • Ignoring churn/seasonality when projecting.

Track Annual Recurring Revenue (ARR) automatically

Use dashboards, reports, and KPI definitions to keep your team aligned. Start a trial or book a demo.

Start free trialBook demo

FAQ

Is ARR the same as annual contract value (ACV)?
No—ACV is contract-level average annualized value; ARR is total recurring run-rate.
Should I report ARR or MRR?
Track both; operate with MRR, report ARR when it fits your stakeholders.

Topic hub

Explore the full cluster for stronger context, benchmarks, templates, and comparisons.

Unit Economics Hub — CAC, Payback, LTV, and Efficiency

Related metrics

  • Monthly Recurring Revenue (MRR)

    MRR is the core revenue heartbeat of SaaS. Learn what counts, how to decompose MRR, and common pitfalls.

  • Customer Lifetime Value (LTV)

    Learn LTV, how to calculate it safely, common pitfalls, and how to increase it.

  • MRR Growth Rate

    MRR growth rate shows how fast recurring revenue is increasing. Learn formula and levers.

  • Gross Margin

    Gross margin is revenue minus COGS. Learn SaaS-specific COGS, benchmarks, and improvement levers.

  • ARPA (Average Revenue Per Account)

    ARPA shows average revenue per account. Learn how to calculate, segment, and increase ARPA.

  • Net New MRR

    Net new MRR shows true recurring revenue growth after churn and contraction. Learn decomposition and levers.

Related calculators

  • CAC Payback Calculator

    Calculate CAC payback period using CAC, ARPA, and gross margin. Share results via URL and track improvements over time.

  • LTV Calculator

    Calculate LTV using ARPA, gross margin, and churn. Includes shareable inputs via URL.

  • LTV:CAC Ratio Calculator

    Compute LTV:CAC ratio using LTV and CAC or via ARPA/gross margin/churn + CAC.

  • Churn Rate Calculator

    Calculate logo churn or revenue churn for a given period. Shareable inputs and tracked usage events.

Related templates