What is ARR (annual recurring revenue)?
ARR is the yearly value of your recurring revenue — the predictable, subscription-based income you can count on. It's the headline number for any subscription business, and it's often misunderstood.
Skip the math — the free ltv cac calculator runs this from your own figures.
Open the free calculator →ARR vs MRR
MRR is monthly recurring revenue — the predictable income you bring in each month from subscriptions. ARR is simply that annualized: MRR multiplied by twelve.
They measure the same thing at different scales. MRR is how you track month-to-month movement; ARR is how you talk about the size of the business.
What actually counts
ARR includes only recurring revenue — subscriptions that renew. One-time fees, setup charges, and usage overages that don't repeat predictably don't belong in ARR, even though they're real revenue.
Mixing one-time income into ARR is a common mistake that makes a business look more predictable than it is.
How to calculate it
The clean version: take your current MRR and multiply by 12. If you'd rather build it up, ARR is (new + expansion − churned recurring revenue) accumulated over the year, expressed as a run-rate.
'Run-rate' means you're projecting your current monthly recurring revenue forward a year — a snapshot of scale, not a promise of what the next 12 months will collect.
Why investors lead with it
Recurring revenue is worth more than one-time revenue because it's predictable — you can plan, hire, and forecast against it. That's why subscription businesses are often valued as a multiple of ARR rather than of total revenue.
The free SaaS calculator below works with your per-customer revenue and churn; the full model builds MRR and ARR month by month.
Questions
Is ARR the same as revenue?
No. Revenue is everything you collect, including one-time fees. ARR is only the annualized recurring portion. A business can have high revenue but low ARR if most of its income doesn't repeat.
Does ARR include discounts?
Yes — use the actual price customers pay after discounts, not list price. ARR should reflect real recurring cash, so committed discounts belong in the number.