Average Revenue Per Account(ARPA)
Quick definition
The average revenue you generate per customer, per year. ARPA shows how much an average customer is worth and helps you determine how much you can invest in sales.
Detailed explanation
ARPA is a simple but powerful metric. You calculate it by dividing your total annual revenue by the number of active customers. A higher ARPA means you earn more per customer, allowing you to invest more in acquiring new customers. For B2B software companies, ARPA is often between €5,000 and €50,000 per year. For consultancy firms it can reach €100,000+. ARPA also helps you determine your sales strategy: with a low ARPA you need to go for volume and efficiency, with a high ARPA you can give more personal attention. Note: ARPA says nothing about profitability. A customer with high ARPA can still be unprofitable if costs are too high. That's why you always look at ARPA together with Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV). If your ARPA rises, that's usually good news: your customers buy more, you can raise your prices, or you're attracting larger customers.
Synonyms
Examples
A software company has 200 customers and €2 million annual revenue. ARPA = €2,000,000 / 200 = €10,000 per customer. They decide they can invest a maximum of €3,000 (30% of ARPA) in sales per new customer.
Match-day sees at a manufacturing company that their ARPA is €80,000. This means they need to bring in 10 new customers per year with 2 sales hours per week (€10,000/year cost) to break even on sales. This becomes their target.
When to use this?
Use ARPA to determine your sales strategy, evaluate your prices, and set your sales targets. Track ARPA monthly to see if you're moving up or down. Watch out for upsell and churn: both have major impact on your ARPA.
Match-day approach
We help you increase ARPA by looking at your customer segmentation. Often you see that 20% of your customers make 80% of your revenue. Then the strategy is: more customers like that 20%, and less energy in small customers. Or: upsell the small customers. We calculate what has more impact.
Related terms
Annual Recurring Revenue(ARR)
The annual recurring revenue from subscriptions and fixed contracts. ARR is simply MRR × 12, but based on annual contracts.
Monthly Recurring Revenue(MRR)
The predictable, recurring revenue you collect every month through subscriptions or fixed contracts. MRR is the foundation of every successful SaaS company.
Learn more
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