All termsMETRICS & KPIS

ARR

Annual Recurring Revenue

Also known as: Annual Recurring Revenue · Annualised Revenue

DEFINITION

The yearly version of MRR — the total recurring subscription revenue a SaaS would earn over 12 months at today's run rate.

In depth

ARR is the number investors, analysts, and acquirers care about most. It's used for company valuation (typical SaaS revenue multiples range from 5× to 15× ARR depending on growth), for comparing companies at different scales, and for setting annual plans.

ARR only counts recurring subscription revenue. One-time implementation fees, professional services, and non-renewing usage overages stay out. For a business with only monthly plans, ARR = MRR × 12. For one with annual contracts, ARR = sum of the contracted annual values.

Formula & example

ARR = MRR × 12 (or sum of annual contracts)
EXAMPLEIf your MRR is $40,000, your ARR is $40,000 × 12 = $480,000.

Rules of thumb

  • Public SaaS companies are typically valued at 5–15× forward ARR.
  • Enterprise SaaS with strong retention commands higher multiples.
  • Report ARR with growth rate — $1M ARR growing 200% YoY beats $5M growing 30%.

Put it into practice

Related terms

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Last reviewed 14 April 2026 by Abhi Verma.