For your subscription business, it's critical to track your recurring revenues. Keeping a pulse on your business, your annual recurring revenue (ARR), will give you a high level understanding of the direction your business is going in and can offer insight to consider when strategizing your pricing, products and growth.

Think of ARR as the big picture. Much like MRR, your ARR is focused on your recurring revenue. Although like the name suggests, your MRR is focused on the monthly value whereas the your ARR looks at your annual recurring revenue.

So how's it calculated? The Formula is simple!

ARR = MRR x 12

How about an example:

Let's say Company A has 100 customers paying $10 per month for their subscription.

The ARR for Company A would be:

ARR = ($10x100) x 12

ARR = $12,000.00

You can take the ARR into consideration when looking at the following:

  • Future revenue forecasts

  • Get a clear understanding of what future goals to aim at

  • Deciding on a baseline for your business

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