Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) is a metric used to measure the predictable revenue that a business can expect to receive on an annual basis from its recurring revenue streams. This typically includes revenue from subscriptions or other recurring sources, such as membership fees or contract-based services. In a simplified scenario ARR can be calculated by multiplying a company's Monthly Recurring Revenue (MRR) by 12. However most SAAS companies prefer breaking down the total figure into some particular customer segments or cohorts ARRs.

Definition

ARR is calculated by multiplying a company's Monthly Recurring Revenue (MRR) by 12, plus the Total Additional Ongoing Revenue (AOR) minus the Total Customer Churn (TC)

$ARR=(MRR\times \ 12)+AOR-TC$

Details

Additional Ongoing Revenue (AOR) might include:

• Training
• Cross-selling additional services
• Support

Standardization Status

Request for Comments (RFC): 22/0004 - Annual Recurring Revenue (ARR)
Type: metric
Version: 0.9
Status:proposal

See also

• Monthly Recurring Revenue (MRR)
• ARR Growth Rate

Sources

• Annual Recurring Revenue (productplan.com)