Annual Recurring Revenue (ARR)
Your recurring revenue at annual scale — the same book as MRR, in the unit boards and investors think in.
What is it?
Annual Recurring Revenue is your monthly recurring revenue expressed on a yearly basis — simply MRR multiplied by twelve. It answers the same question as MRR at the scale boards and investors think in: what is the predictable, annualised value of the subscription book?
ARR and MRR are the same underlying number, so anything that moves one moves the other. ARR is the more natural unit for annual contracts and for companies past a few million in revenue; MRR stays the sharper lens for month-to-month movement. Pick one as your primary and be consistent about it.
How to calculate?
Multiply total MRR by twelve. A book of $25,000 MRR is $300,000 ARR. Only recurring revenue belongs in it — normalise annual and multi-year contracts to their monthly value first, then annualise, so a $1,200/year plan counts as exactly $1,200 of ARR and no more.
Because ARR is just annualised MRR, the trap is double-counting: an annual contract is one year of recurring revenue, not a one-time payment layered on top. The cleanest definition is twelve times current MRR, computed from the same normalised base every other metric uses.