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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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