Annual Recurring Revenue (ARR) is the cornerstone metric for any subscription-based business. It represents the total yearly value of your recurring revenue streams and is the single most important number investors look at when evaluating SaaS companies.
To calculate ARR, start with your Monthly Recurring Revenue (MRR) -- the sum of all recurring subscription payments you collect each month. Multiply that by 12, and you have your ARR. If you collect $8,000 per month in subscriptions, your ARR is $96,000.
For businesses with multiple pricing plans, calculate the MRR contribution of each plan first: multiply the number of active subscribers by the monthly price for each plan, sum them together, then multiply by 12 for your total ARR.
It is important to only include recurring revenue in your ARR calculation. One-time payments, setup fees, consulting revenue, and lifetime deals should be excluded. ARR measures the predictable, repeatable portion of your income -- the revenue you can count on next year if nothing changes.
When tracking ARR over time, pay attention to three components: new ARR from new customers, expansion ARR from upgrades and upsells, and churned ARR from cancellations and downgrades. Net new ARR equals new ARR plus expansion ARR minus churned ARR. This breakdown reveals whether your growth is healthy and sustainable.
On ShowMRR, we track verified ARR for 800+ startups across every category. The data shows that the fastest-growing companies share one trait: they obsess over their ARR metrics and make data-driven decisions to improve them every month.
ARR = MRR × 12
Where MRR is your Monthly Recurring Revenue -- the sum of all active subscription payments in a given month. This is the simplest and most widely used ARR formula.
You can also calculate ARR from individual subscriptions:
ARR = (Subscribers1 × Price1 + Subscribers2 × Price2 + ...) × 12
Every SaaS founder remembers crossing their first ARR milestone. These are the benchmarks that matter -- and the ones tracked on the ShowMRR Leaderboard:
Track how your ARR stacks up against hundreds of verified startups on ShowMRR. See where you rank and who is growing fastest in your category.
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ARR stands for Annual Recurring Revenue. It is the annualized value of your recurring subscription revenue, calculated by multiplying your Monthly Recurring Revenue (MRR) by 12. ARR is one of the most important SaaS metrics used by investors and founders to measure business scale.
The simplest ARR formula is: ARR = MRR x 12. If your MRR is $5,000, your ARR is $60,000. You can also calculate ARR by summing the annual value of all active subscriptions, including upgrades and minus churned revenue.
MRR (Monthly Recurring Revenue) measures your recurring revenue on a monthly basis, while ARR (Annual Recurring Revenue) measures it on a yearly basis. ARR = MRR x 12. MRR is better for tracking short-term trends, while ARR is preferred by investors for valuation and benchmarking.
Most SaaS startups track both. MRR is useful for month-over-month growth tracking and operational decisions. ARR is preferred when talking to investors, comparing against benchmarks, and calculating company valuation. Startups above $1M ARR typically emphasize ARR in their metrics.
According to data from 800+ startups on ShowMRR, healthy ARR growth varies by stage. Early-stage startups (under $1M ARR) should aim for 2-3x annual growth. Growth-stage startups ($1M-$10M ARR) typically grow 50-100% year-over-year. The top quartile of startups on ShowMRR grow at 15-20% month-over-month.
No. ARR only includes recurring subscription revenue. One-time payments, setup fees, consulting income, and lifetime deals are excluded from ARR calculations. Only predictable, recurring revenue should be counted when calculating your ARR.