Business Metrics

What is ARR?

Definition

Annual Recurring Revenue — the annualized value of recurring subscription revenue, calculated as MRR multiplied by 12.

Understanding ARR

ARR provides a yearly view of subscription revenue and is the standard metric for SaaS businesses, especially those with annual contracts. ARR = MRR x 12. For example, if a company earns $100,000 in MRR, their ARR is $1.2 million.

ARR is commonly used by investors to evaluate SaaS companies and is a key factor in valuations. For personal finance, knowing your personal ARR (total yearly subscription spending) helps with annual budgeting and identifying opportunities to save.

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