Annual Recurring Revenue
ARR
The annualized value of your subscription revenue — MRR × 12.
Definition
Annual Recurring Revenue (ARR) is the annualized value of all active subscription contracts, calculated as MRR × 12. For annual contracts, ARR equals the total contract value. ARR provides a larger-scale view of subscription revenue and is the standard metric for B2B SaaS businesses, particularly at growth and enterprise stages where annual contracts dominate.
Why It Matters
ARR is the primary metric used in SaaS valuations. Investors and acquirers quote multiples as 'X times ARR.' Crossing $1M ARR is a meaningful milestone; $10M ARR typically indicates repeatable go-to-market. ARR growth rate is how you compare yourself to benchmarks and competitors.
Example
If your MRR is $83,333, your ARR is $1,000,000 — a meaningful milestone often described as 'breaking seven figures.'