The yearly value of a company's subscription or contract revenue that is expected to repeat, a key metric for SaaS businesses.
Annual recurring revenue, or ARR, counts predictable revenue from active subscriptions and multi-year contracts, normalized to one year. It usually excludes one-time fees such as setup charges or consulting. Monthly recurring revenue, or MRR, is the same idea on a monthly basis, and ARR is often calculated as MRR multiplied by twelve.
For example, a software company with 200 customers each paying 50 dollars a month has an MRR of 10,000 dollars and an ARR of 120,000 dollars. Investors and founders track ARR growth, along with churn and expansion revenue from existing customers, to judge momentum and company value. Because ARR is not a standard accounting measure, definitions vary between companies, so it is important to check what is included before comparing figures.
The percentage of customers or subscribers who stop using a product or cancel a subscription during a given period.
Customer Acquisition CostThe average amount a business spends on sales and marketing to win one new customer, known as CAC.
Software as a ServiceA model in which software is hosted in the cloud and delivered to users over the internet, usually through a subscription.
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