Annual Recurring Revenue (ARR)
Annual Recurring Revenue (ARR) is a key metric used by subscription-based businesses to track and measure their predictable, recurring revenue streams over a one-year period.
What is Annual Recurring Revenue (ARR)?
Annual recurring revenue (ARR) is a key performance metric for subscription-based businesses, representing the predictable and recurring revenue components over a year. It’s calculated by multiplying the monthly recurring revenue (MRR) by 12. ARR provides a clear picture of a company's revenue health and growth potential, excluding one-time fees and variable charges.
Tracking ARR helps businesses understand their long-term financial stability and forecast future revenue streams. It’s particularly important for investors and stakeholders who are interested in the sustainable income a company can generate. By focusing on ARR, companies can better strategize on customer retention, pricing models and market expansion to drive consistent growth.
