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ARR Calculation Formula:
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Annual Recurring Revenue (ARR) is a key metric for subscription-based businesses that represents the predictable annual revenue generated from active subscriptions. It is calculated by multiplying the Monthly Recurring Revenue (MRR) by 12.
The calculator uses the ARR calculation formula:
Where:
Explanation: This simple calculation projects your monthly subscription revenue to an annual basis, providing a clear picture of your business's recurring revenue stream.
Details: ARR is a crucial metric for SaaS and subscription businesses as it helps in forecasting revenue, evaluating business growth, attracting investors, and making strategic decisions about resource allocation and expansion.
Tips: Enter your Monthly Recurring Revenue (MRR) in Australian Dollars. The value must be a positive number representing your current monthly subscription revenue.
Q1: What's the difference between ARR and revenue?
A: ARR specifically measures predictable, recurring revenue from subscriptions, while total revenue may include one-time sales and other non-recurring income.
Q2: Should I include one-time setup fees in MRR?
A: No, MRR should only include recurring subscription fees. One-time fees should be accounted for separately as they don't represent ongoing revenue.
Q3: How often should I calculate ARR?
A: ARR should be calculated regularly, typically monthly, to track growth trends and monitor the health of your subscription business.
Q4: What is a good ARR growth rate?
A: A healthy SaaS business typically aims for 20-30% year-over-year ARR growth, though this can vary by industry and business stage.
Q5: Does ARR account for churn?
A: This basic calculation uses current MRR. For accurate forecasting, you should factor in expected churn rates and new customer acquisition.