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Revenue metrics

ARR (Annual Recurring Revenue)

The annualised value of your recurring subscriptions, normally MRR multiplied by twelve, used as the headline size of a subscription business.

Annual Recurring Revenue is MRR × 12. It is the number a subscription business is usually described by, because it is the closest single figure to “how big is this”.

ARR is a run rate, not a forecast and not revenue earned. It says what the next twelve months would be worth if nothing changed, and something always changes. It is also not the same as bookings or billings: a three-year contract signed today is one year of ARR, three years of bookings, and whatever you actually invoiced this month in billings.

Businesses with a large usage component often report ARR with a note about how usage was treated. If you cannot say in one sentence how usage enters your ARR, the number is not yet comparable to anyone else’s.

Related terms

  • MRR (Monthly Recurring Revenue) The normalised monthly value of every active recurring subscription, with annual and multi-month plans spread evenly across the months they cover.
  • Bookings, billings and revenue Three different numbers that are routinely confused: what was contracted, what was invoiced, and what has been earned.
  • NRR (Net Revenue Retention) Revenue this period from a cohort of existing customers, divided by what that same cohort paid a year ago, including expansion, contraction and churn.