eCommerce glossary

All the terminology you’ll ever need, together in one place. We can even let you know when new terms are added.

Annual Recurring Revenue (ARR)

ARR stands for Annual Recurring Revenue. It is a measure of the amount of revenue that a company can expect to receive on a yearly basis and is typically used as a metric by subscription-based businesses.

How do you calculate ARR?

ARR is calculated by taking the total monthly recurring revenue for a given year and multiplying it by the number of months in that year. For example, if a company has $100,000 in monthly recurring revenue, its ARR would be $1.2 million.

The simple formula would be: Total monthly recurring revenue x 12 (months) = Annual recurring revenue.

Some benefits of tracking ARR include:

  • It provides a clear picture of a company's growth
  • It can be used to predict future revenue
  • It can help identify upselling and cross-selling opportunities

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