Annual Recurring Revenue(ARR)

ARR is the big brother of MRR. Where MRR focuses monthly, ARR looks at the big picture: how much recurring revenue do you generate annually? Most B2B companies work with annual contracts, so ARR is often more relevant than MRR. You calculate ARR by adding up all annual contracts. Monthly contracts you multiply × 12. ARR grows through new customers, upsell and cross-sell, and shrinks through churn. Healthy ARR growth is between 50-100% per year for early-stage startups, and 20-40% for scale-ups. ARR is important in fundraising: investors look at your ARR and your ARR multiple (valuation / ARR). SaaS companies are often valued at 5-15× ARR, depending on growth rate and profitability. ARR also gives insight into your sales team performance: how much new ARR has each team member brought in? And how much ARR was lost? Note: only recurring revenue counts. One-time implementation costs or projects don't count toward ARR.