ARR

ARR (Annual Recurring Revenue) is the annualised value of a subscription business's recurring revenue streams. It is the most widely used top-line metric for valuing and benchmarking SaaS and subscription companies, because it converts the relentless month-to-month churn-and-growth dynamics of MRR into a single annual figure that's easier to compare against company valuations, fundraising targets, and industry benchmarks.

ARR is not a cash-flow or accounting revenue figure, it's a run-rate metric. It answers the question "if nothing changed, how much would this business collect in recurring revenue over the next 12 months?"

ARR = MRR × 12

ARR = Sum of (Annual Contract Value) across all active customers, for businesses billed annually

ARR Growth Rate (YoY) = (Current ARR − ARR 12 months ago) / ARR 12 months ago

A SaaS company exits the year with:

If the company's ARR was $74,840 a year earlier:

YoY ARR Growth = ($112,260 − $74,840) / $74,840 = 50%

A company growing ARR at 50%+ year-over-year with healthy churn rate and unit economics (CAC, CLV) is typically considered an attractive growth-stage SaaS business by investors.

Use the MRR / ARR calculator to project your own ARR from pricing tiers and customer counts.

• ARR is forward-looking from a point-in-time snapshot: It assumes the current revenue base persists for 12 months, which is rarely exactly true, it's a planning and benchmarking tool, not a guarantee.
• Net Revenue Retention determines whether ARR compounds: A business with 110% net revenue retention sees existing-customer ARR grow even with zero new sales; a business at 85% retention needs constant new bookings just to stay flat. This single number often matters more to investors than the headline ARR figure.
• Burn multiple ties ARR growth to spending: Investors increasingly evaluate "Net New ARR added per dollar of net burn rate", a burn multiple under 1 (adding more than $1 of ARR per $1 burned) is considered highly capital-efficient.
• ARR is the default SaaS valuation anchor: Acquisition and fundraising conversations are almost always framed as a multiple of ARR rather than profit, because most growth-stage SaaS companies are not yet profitable, ARR is the proxy for franchise value.
• Large one-time deals can distort ARR: A single multi-year enterprise contract recognised in one month can spike that month's MRR, and therefore ARR, without reflecting a durable change in the business; finance teams often normalise for these anomalies before reporting externally.