Definition
ARR (Annual Recurring Revenue) is the annualized run rate of recurring revenue, typically MRR x 12.
Why it matters
ARR is a standard SaaS metric for comparing growth over time, but it is not recognized revenue.
Pricing implications
Price changes can shift ARR quickly, but you must validate against churn and retention to confirm sustainable impact.
Measurement tips
Use normalized MRR and exclude one-time fees.
Checklist
- Use consistent MRR definitions.
- Exclude non-recurring services from ARR.
- Normalize annual contracts to monthly equivalents.
- Compare ARR trends by segment.
- Avoid mixing ARR with recognized revenue.
- Recompute ARR after pricing changes.
- Track ARR alongside churn metrics.
- Document ARR calculation methods.