Annual Recurring Revenue (ARR)

Jargon
Written By Landon Howell

Annual Recurring Revenue (ARR) refers to the amount of revenue a startup generates in a year from its recurring sources of income, such as subscriptions, maintenance fees, or service contracts.

ARR is an important financial metric for startups with a subscription-based business model (ex: Netflix, Shipt, The New York Times) or other recurring revenue streams.

ARR is a key indicator of a startup's financial health and growth potential, and it is often used by investors and analysts to evaluate the startup's performance and future prospects.

How to calculate Annual Recurring Revenue

Monthly Recurring Revenue (MRR) x 12 = ARR

For startups, Monthly Recurring Revenue (MRR) can be a useful way to measure short-term growth. However, ARR provides a more comprehensive picture of your long-term growth potential, making it a valuable tool for financial modeling, company road mapping, and long-term planning.

Landon Howell
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