1. What is Annual Recurring Revenue (ARR)?

Annual Recurring Revenue (ARR) is a key metric for subscription-based businesses that measures the predictable annual revenue generated from subscriptions. It's calculated by multiplying the Monthly Recurring Revenue (MRR) by 12.

2. How Does the Calculator Work?

The calculator uses the ARR formula:

Where:

• \( ARR \) — Annual Recurring Revenue ($)
• \( MRR \) — Monthly Recurring Revenue ($)

Explanation: This simple formula converts monthly subscription revenue into an annualized figure, providing a standardized view of recurring revenue.

3. Importance of ARR Calculation

Details: ARR is crucial for SaaS and subscription businesses to measure growth, forecast revenue, evaluate business health, and attract investors. It provides a clear picture of predictable revenue streams.

4. Using the Calculator

Tips: Enter your Monthly Recurring Revenue in dollars. The value must be zero or positive. The calculator will instantly compute your Annual Recurring Revenue.

5. Frequently Asked Questions (FAQ)

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 recorded separately as they don't represent predictable recurring revenue.

Q3: How often should I calculate ARR?
A: Most businesses calculate ARR monthly to track growth trends and measure performance against targets.

Q4: What is a good ARR growth rate?
A: Growth rates vary by industry, but typically 20-30% annual growth is considered good for SaaS companies, with exceptional companies achieving 100%+ growth.

Q5: Does ARR account for churn?
A: ARR calculations should account for net changes, including both new subscriptions and lost revenue from cancellations (churn).