1. What is SaaS ARR?

Annual Recurring Revenue (ARR) is a key metric for SaaS (Software as a Service) companies that measures the predictable annual revenue generated from subscriptions. It's calculated by multiplying the Monthly Recurring Revenue (MRR) by 12.

2. How Does the Calculator Work?

The calculator uses the ARR formula:

Where:

• \( MRR \) — Monthly Recurring Revenue ($)
• \( 12 \) — Number of months in a year

Explanation: This simple calculation projects your monthly subscription revenue to an annual figure, providing a standardized view of your company's recurring revenue performance.

3. Importance of ARR Calculation

Details: ARR is crucial for SaaS businesses as it helps in forecasting growth, evaluating business health, attracting investors, and making strategic decisions about resource allocation and expansion.

4. Using the Calculator

Tips: Enter your Monthly Recurring Revenue in USD. The value must be greater than 0. The calculator will automatically compute your Annual Recurring Revenue.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ARR and revenue?
A: ARR specifically measures recurring revenue from subscriptions, while total revenue may include one-time sales, services, and other non-recurring income.

Q2: Should I include one-time setup fees in MRR?
A: No, MRR should only include recurring subscription fees. One-time fees should be recorded separately as they don't represent predictable recurring revenue.

Q3: How often should I calculate ARR?
A: Most SaaS companies track ARR monthly to monitor growth trends and business performance consistently.

Q4: What is a good ARR growth rate for SaaS companies?
A: A healthy SaaS company typically aims for 20-40% year-over-year ARR growth, though this varies by company stage and market.

Q5: Does ARR account for churn?
A: This basic calculation doesn't factor in churn. For a more accurate picture, you should calculate net ARR which accounts for both new revenue and lost revenue from cancellations.