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.
Related terms
- Monthly recurring revenue (MRR)Monthly recurring revenue (MRR) is the predictable subscription revenue a business expects to earn every month, normalized to a monthly amount and excluding one-time payments.
- Net revenue retention (NRR)Net revenue retention (NRR) is the percentage of recurring revenue a business keeps from an existing group of customers over a period, after adding expansion and subtracting downgrades and churn, excluding new customers.
- Expansion revenueExpansion revenue is additional recurring revenue earned from existing customers — through plan upgrades, extra seats, add-ons or higher usage — as opposed to revenue from new customers.
- Average revenue per user (ARPU)Average revenue per user (ARPU) is the average amount of revenue a business earns per user or account over a period, usually per month — calculated as revenue divided by the number of users.
- Churn rateChurn rate is the percentage of customers (or recurring revenue) that a business loses during a period, out of the customers (or revenue) it had at the start of that period.
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