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Metrics & Analytics

ARR (Annual Recurring Revenue)

The yearly value of recurring subscription revenue, used for measuring SaaS business scale.

Definition

Annual Recurring Revenue (ARR) is your Monthly Recurring Revenue multiplied by 12. It represents the annualized value of your subscription business and is the primary metric investors use to value SaaS companies. ARR strips out one-time revenues and non-recurring fees to show the predictable, repeatable core of your business.

Why It Matters

ARR is the standard currency of SaaS business valuation. When investors say a company is worth "10x ARR," they mean ten times this number. For founders, ARR provides a clear measure of business scale and growth trajectory. It smooths out monthly fluctuations and shows the underlying health of subscription revenue.

How It Works

Calculate ARR by taking your current MRR and multiplying by 12. Include only recurring subscription revenue. Exclude one-time fees, professional services, and non-recurring charges. Track ARR growth month-over-month and year-over-year. Segment by customer type, plan, or cohort for deeper analysis.

Best Practices

  • 1Track ARR alongside MRR for both growth and investor conversations
  • 2Report new ARR, expansion ARR, and churned ARR separately
  • 3Calculate ARR by customer segment to identify best-fit markets
  • 4Use ARR milestones ($100K, $1M, $10M) as company goals
  • 5Exclude non-recurring revenue from ARR calculations
  • 6Compare ARR per customer to identify pricing opportunities

Revenue Tracking from Stripe

Sequenzy syncs subscription data from Stripe so you can segment customers by ARR and trigger emails based on revenue milestones.

Learn More

Frequently Asked Questions

Use MRR for operational tracking and month-to-month analysis. Use ARR for investor conversations and company milestones. ARR sounds bigger (12x larger) and is the standard for SaaS valuations. Both represent the same underlying revenue.

For annual subscriptions, the full annual contract value counts toward ARR. Do not divide by 12 and multiply back. A $1,200 annual plan is $1,200 ARR (or $100 MRR). The math is the same, just presented differently.

No. ARR should only include recurring subscription revenue. One-time implementation fees, consulting, or professional services are separate. Some companies track Total Contract Value (TCV) which includes everything, but ARR stays pure.