ARR Calculator

Annual Recurring Revenue (ARR) is the annualized value of your recurring subscription revenue. It represents the predictable, repeatable revenue your SaaS business generates every year from active subscriptions. ARR is the single most important top-line metric for subscription businesses because it measures the scale and trajectory of your revenue engine.

What to include in ARR:

• Monthly subscription revenue (annualized by multiplying by 12)
• Annual contract values from yearly subscriptions
• Expansion revenue from upsells and upgrades

What to exclude: One-time fees (setup, implementation, consulting), usage-based overages that are not committed, and professional services revenue. These are not recurring and inflate your ARR if included.

The standard ARR formula combines your annualized monthly subscriptions with annual contract values:

Example: If your monthly subscription revenue is $50,000 (including $5,000 expansion MRR minus $3,000 churned MRR = $52,000 effective MRR) and you have $200,000 in annual contracts, your ARR is:

For a more complete picture, track net new ARR — the difference between expansion and churned revenue, annualized. This tells you whether your revenue base is growing or shrinking from existing customers.

ARR and MRR measure the same underlying revenue but at different time scales. MRR (Monthly Recurring Revenue) is your normalized monthly subscription revenue, while ARR is MRR annualized (MRR x 12) plus any annual contracts.

ARR growth expectations depend heavily on your stage. The T2D3 framework (Triple, Triple, Double, Double, Double) is a common benchmark for venture-backed SaaS:

Bootstrapped companies typically grow slower but more efficiently. A 50-100% YoY growth rate with strong unit economics is often healthier than 3x growth funded by burning cash.

ARR is the primary metric investors use to value SaaS companies. Here is how it factors into fundraising and valuation:

• Valuation multiples: SaaS companies are typically valued at a multiple of ARR. Early-stage companies might see 10-20x ARR, while growth-stage companies range from 5-15x depending on growth rate and retention.
• ARR milestones: $1M ARR is the typical Series A threshold. $5M ARR unlocks Series B conversations. $10M+ ARR puts you in growth equity territory. Each milestone signals a new level of product-market fit and go-to-market maturity.
• Quality of ARR matters: Investors look beyond the headline number. High net revenue retention (above 110%), low logo churn (below 2% monthly), and diversified revenue (no single customer above 10% of ARR) all increase your valuation multiple.
• Current ARR or committed ARR: Annualizing the MRR billing today and annualizing committed MRR produce two different numbers, and both get called ARR. Committed MRR applies contracts you have already signed but not yet started, along with downgrades and served cancellations. Say which basis a figure came from before anyone compares it to a multiple.
• ARR is not total contract value: A three-year $150K contract is a $150K booking and a $50K ARR contribution, and one-time implementation fees belong in neither. See bookings vs billings vs revenue for how the same contract produces four different numbers on four different dates.
• ARR per employee: A key efficiency metric. Best-in-class SaaS companies generate $200K-$300K+ ARR per employee. This signals operational efficiency and scalability.