How to Calculate Annual Recurring Revenue
What is Annual Recurring Revenue?
Calculates total predictable annual revenue from subscriptions. Indicates business health and valuation potential for SaaS companies.
Step-by-Step Guide
- 1Calculate total MRR
- 2Multiply MRR by 12 for annualized revenue
- 3Account for expected churn and new subscriptions
- 4Compare to growth targets
Worked Examples
Input
$5000MRR
Result
$60000ARR
Common Mistakes to Avoid
- ✕Counting annual payment as single-year revenue instead of spreading
- ✕Not adjusting for expected churn in projections
Frequently Asked Questions
Is ARR the same as annual revenue?
No; ARR counts only recurring subscription revenue at current run rate, excluding one-time sales.
How do I grow ARR?
Acquire new customers, reduce churn, and increase ARPU (average revenue per user) through upsells.
Ready to calculate? Try the free Annual Recurring Revenue Calculator
Try it yourself →