Average Revenue Per Account (ARPA)
Average Revenue Per Account (ARPA) is a financial metric used by startups to measure the average revenue generated per customer account.
ARPA is calculated by dividing the total revenue generated from a specific group of customers by the number of accounts within that group.
It is particularly useful for startups with a subscription-based business model because it allows them to measure the average revenue generated per user on a recurring basis.
How to calculate Average Revenue Per Account
Monthly Recurring Revenue (MRR) / Number of total accounts = Average Revenue Per Account (ARPA)
ARPA can be used to assess pricing strategies, identify opportunities to upsell or cross-sell products and analyze the performance of different customer segments.
By monitoring ARPA, startups can identify trends and patterns in their customer base and make informed decisions about how to optimize their revenue streams.
What is the difference between ARPA and ARPU at a startup?
The key difference between these metrics is in the unit of measurement.
ARPA is calculated based on customer accounts.
ARPU is calculated based on individual users.
Therefore, startups with different business models may use one or the other to measure their revenue streams.
While both metrics can provide valuable insights into a startup's financial performance, startups need to choose the right metric for their business model to assess their revenue streams accurately.