Annual Recurring Revenue
MRR × 12, representing yearly subscription revenue.
1 min readLast updated Apr 2026
ARR
Annual Recurring Revenue
MRR × 12, representing yearly subscription revenue.
Why It Matters
ARR is the standard metric for subscription business valuation and fundraising. It's easier to contextualize for annual planning, board meetings, and comparing against annual expenses. Enterprise valuations are often expressed as multiples of ARR (e.g., '10x ARR').
Practical Example
Scenario
Your subscription brand has achieved $85,000 in MRR after 18 months of growth.
Calculation
ARR = $85,000 × 12 = $1,020,000Result
Crossing the $1M ARR milestone is a significant psychological and practical threshold—often triggering interest from growth investors and enabling more sophisticated operational planning.
Pro Tips
- 1Use ARR for annual planning and MRR for monthly operational decisions
- 2Track your path to key ARR milestones ($100K, $500K, $1M, $5M) as growth waypoints
- 3Compare ARR growth rate year-over-year to smooth out seasonal variations
- 4When pitching investors, lead with ARR and ARR growth rate
Common Mistakes to Avoid
Simply multiplying December MRR by 12 when MRR fluctuates seasonally
Using ARR for short-term operational decisions where MRR is more appropriate
Confusing ARR with annual revenue (which includes non-recurring revenue)