Glossary · SaaS metrics

What is annual recurring revenue (ARR)?

Annual recurring revenue (ARR) is the yearly value of a company's active recurring subscription contracts — for most SaaS companies, MRR multiplied by 12.

Also called: ARR

Updated

How is ARR calculated?

ARR = MRR × 12
(contract-based: Σ annualized value of active recurring contracts)

ARR is a snapshot of the run rate today, not a forecast or a sum of last year's revenue. Like MRR, it excludes one-time fees, professional services and non-committed usage.

ARR example

With MRR of $41,500 at the end of September, ARR is $498,000. If 30% of customers pay annually, that doesn't change ARR — it changes cash flow. A company that "did $500k in revenue last year" may have an ARR well above or below that, depending on whether it grew or shrank during the year.

Why ARR matters

ARR is the standard size metric for SaaS businesses selling annual contracts, and the number valuations and growth milestones ("$1M ARR") are usually quoted in. Companies selling mainly monthly self-serve plans tend to talk in MRR instead; it's the same information at a different scale.

What doesn't belong in ARR

  • Lifetime deals and one-time purchases.
  • Implementation or onboarding fees.
  • Signed contracts that haven't started (often tracked separately as contracted ARR).
  • Trials and free plans.
  • Variable usage above a committed minimum, unless it's consistently recurring and you disclose the method.

ARR and VisitTrack

VisitTrack doesn't compute ARR; your billing system does. It shows which marketing sources produced the payments behind it: each payment is credited to the paying visitor's first touch, and the Revenue tab breaks totals down by referrer, campaign and landing page. Pair that with the CAC calculator to see which channels add ARR efficiently.

Frequently asked questions

What is the difference between ARR and MRR?

They measure the same recurring revenue on different scales: ARR is the annualized value, usually MRR times 12. Monthly self-serve businesses often report MRR; annual-contract businesses usually report ARR.

Is ARR the same as annual revenue?

No. Annual revenue is what you actually earned over a past year, including one-time payments. ARR is the current run rate of recurring subscriptions only.

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