Annual Recurring Revenue (ARR) is a metric used to measure the predictable and recurring revenue generated from a subscription-based business model. It is the amount of revenue a company expects to receive from its customers on an annual basis, assuming that they renew their subscriptions for another year.
ARR is calculated by multiplying the monthly recurring revenue (MRR) by 12. For example, if a company has 100 customers paying $100 per month, its MRR would be $10,000. Its ARR would then be $120,000 ($10,000 multiplied by 12 months).
ARR is an important metric for subscription-based businesses because it provides insight into the company's revenue growth and stability. By tracking ARR, a company can monitor its customer retention rate and make informed decisions about marketing, sales, and product development. It is also a useful metric for investors and analysts to assess the long-term health and potential of a company.
See all terms