What is ARR?
Definition
Annual Recurring Revenue — the annualized value of recurring subscription revenue, calculated as MRR multiplied by 12.
Understanding ARR
ARR provides a yearly view of subscription revenue and is the standard metric for SaaS businesses, especially those with annual contracts. ARR = MRR x 12. For example, if a company earns $100,000 in MRR, their ARR is $1.2 million.
ARR is commonly used by investors to evaluate SaaS companies and is a key factor in valuations. For personal finance, knowing your personal ARR (total yearly subscription spending) helps with annual budgeting and identifying opportunities to save.
Related Terms
MRR
Monthly Recurring Revenue — the predictable total revenue a subscription business expects to earn each month from all active subscriptions.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.
Recurring Billing
An automatic payment system that charges a customer at predetermined intervals for ongoing access to a product or service.