What Is ARR (Annual Recurring Revenue)?

The annualized value of recurring subscription revenue.

The annualized value of recurring subscription revenue.

Annual Recurring Revenue (ARR) is MRR multiplied by 12. It represents the yearly value of your recurring subscription revenue and is the standard metric used for SaaS company valuation.

ARR is particularly important for enterprise SaaS companies with annual contracts. It smooths out monthly fluctuations and gives investors a clear picture of revenue scale.

Most SaaS valuations are expressed as multiples of ARR — for example, a company with $5M ARR valued at 10x would be worth $50M.

Formula

ARR = MRR × 12

Example

If your MRR is $50,000, your ARR is $600,000.

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