Annual Recurring Revenue (ARR)
The annualized value of your recurring revenue — the headline metric for fundraising, board reporting, and benchmarking SaaS business scale.
Formula
ARR = MRR × 12
Where MRR is your current Monthly Recurring Revenue, with all subscriptions normalized to monthly values.
What is ARR?
Annual Recurring Revenue (ARR) is the annualized value of your subscription business. It takes your current Monthly Recurring Revenue and projects it across a full year, giving a single number that represents the scale of your recurring revenue base.
ARR is not a prediction — it doesn't assume you'll add or lose any customers. It simply answers: "If nothing changed, how much recurring revenue would we generate over the next 12 months?" That makes it a clean, comparable snapshot of business size at any point in time.
How to calculate ARR
The calculation is straightforward once you have your MRR correct:
- Calculate your current MRR — sum all active subscription values, normalized to monthly (annual plans divided by 12, monthly plans at face value).
- Multiply by 12 — that's your ARR.
Worked Example
ARR milestones that matter
In the SaaS world, certain ARR milestones carry real signal value — both internally and to investors:
| ARR Milestone | What It Signals |
|---|---|
| $10K ARR | Early traction — you have paying customers willing to commit |
| $100K ARR | Product-market fit signal — your offering solves a real, recurring problem |
| $1M ARR | Series A territory — you have a repeatable, scalable business |
| $10M ARR | Series B+ — meaningful scale, often with a path to profitability |
When to use ARR vs. MRR
Both metrics describe the same underlying business — they're just expressed at different time scales. Use the right one for the right context:
Use MRR for day-to-day operations. MRR is more sensitive to recent changes — a big new customer or a churn spike shows up immediately. It's the metric to watch week-over-week when you're actively managing growth.
Use ARR for fundraising and investor communication. ARR is the industry-standard language for B2B SaaS fundraising. Investors, benchmarks, and valuation multiples are all expressed in ARR terms. When you're talking to VCs or angels, lead with ARR.
ARR is most meaningful for B2B SaaS with longer contracts. If your average contract length is less than a year (high-velocity B2C or SMB), MRR is often the more honest representation of your business. ARR can look deceptively large for businesses with high monthly churn.
Common ARR mistakes
- Using booked ARR instead of recognized ARR. Booked ARR counts a contract the moment it's signed, even before the customer has gone live. Recognized ARR only counts active, billing subscriptions. Be explicit about which you're reporting.
- Including one-time revenue. ARR is specifically recurring revenue. One-time professional services, setup fees, or consulting engagements don't belong in the number, even if they're large.
- Using ARR to mask high monthly churn. A business with $1M ARR but 10% monthly churn is not healthy — it's burning through its customer base at a rate of roughly 70% per year. Always report ARR alongside churn rate for an honest picture.
Track ARR automatically from Stripe
Abner calculates your ARR and MRR directly from your Stripe data, updated daily. No spreadsheets, no manual normalization.
Start free trial →Related metrics and reading
- Monthly Recurring Revenue (MRR) — the foundation for ARR; get MRR right first.
- Net Revenue Retention (NRR) — the quality signal that validates your ARR growth.
- Churn Rate — how fast you're losing the ARR you've built.
- The 6 SaaS revenue metrics every founder should track
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