What is ARR?
Annual Recurring Revenue (ARR) is your MRRmultiplied by 12. It projects your current monthly subscription revenue to an annualized figure — the revenue you’d earn over the next 12 months if nothing changed.
ARR is the strategic lens on the same data MRR shows operationally. While MRR tracks month-to-month changes, ARR frames your revenue at the scale investors, boards, and fundraising decks use. Common milestones — $100K ARR, $1M ARR, $10M ARR — are the markers that define SaaS growth stages.
The ARR formula
| Variable | What it captures |
|---|---|
| MRR | Monthly Recurring Revenue — total subscription revenue normalized to a monthly figure |
This is universal across all SaaS analytics tools. North Metric, ChartMogul, Stripe, and every other platform use the same formula. There is no alternative definition.
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Benchmark My SaaSWorked example
Two active subscriptions on March 15:
| Subscription | Plan | Billed | MRR |
|---|---|---|---|
| Sub A | Pro | Monthly | $29.00 |
| Sub B | Starter | Annual ($126/yr) | $10.50 |
| Total MRR | $39.50 | ||
This value was cross-validated against four independent sources — North Metric, Stripe, and two leading SaaS analytics platforms. All agree on $39.50 MRR, producing $474.00 ARR.
How it’s computed
ARR inherits its value entirely from MRR. The computation pipeline is:
| Variable | What it captures |
|---|---|
| Step 1 | Reconstruct active subscriptions at the snapshot timestamp |
| Step 2 | Normalize each subscription's price to monthly (annual ÷ 12, quarterly ÷ 3, etc.) |
| Step 3 | Apply active coupons and discounts |
| Step 4 | Sum all normalized amounts → MRR |
| Step 5 | Multiply by 12 → ARR |
See the MRR guide for the full normalization pipeline, discount handling, and edge cases.
ARR Movement
ARR Movement is MRR Movement × 12. The same five-component waterfall applies:
Every MRR movement component is multiplied by 12 for the ARR view. The classification rules are identical — a $500 churn event in MRR becomes a $6,000 churn event in ARR Movement.
ARR vs MRR — when to use which
ARR and MRR measure the same thing at different scales. They never disagree — ARR is always exactly 12× MRR. The choice is about context.
| ARR | MRR | |
|---|---|---|
| Scale | Annual ($474 → $474K → $1M) | Monthly ($39.50 → $39.5K → $83K) |
| Primary audience | Investors, board, fundraising | Operations, product, CS teams |
| When to use | Strategic planning, milestones, comparables | Month-to-month changes, churn, expansion |
| Growth tracking | Year-over-year trajectory | Month-over-month growth rate |
Common ARR mistakes
- Summing the last 12 months of revenue. ARR is not trailing-twelve-months revenue. It’s current MRR × 12 — a forward-looking projection. An account that started 3 months ago with $10K MRR has $120K ARR, even though total historical revenue is only $30K.
- Counting one-time revenue. Setup fees, implementation charges, and one-time add-ons inflate ARR if included. Only recurring subscription amounts should feed into MRR, and therefore ARR.
- Using different multipliers for different billing intervals. The multiplier is always 12, regardless of whether your customers pay monthly, quarterly, or annually. The normalization to monthly happens at the MRR level.
- Mixing ARR and MRR growth rates. A 10% MRR growth rate is not a 10% ARR growth rate over a year — it compounds monthly. 10% monthly MRR growth is ~214% annual ARR growth. Quote the same metric consistently.
Frequently asked questions
What’s the difference between ARR and MRR?
ARR = MRR × 12. They measure the same recurring revenue at different scales — ARR is the annualized view of the exact same data. Use MRR for monthly operational decisions like tracking churn and expansion, and ARR for annual planning, fundraising, and investor communication.
Is ARR a projection or a sum?
ARR is a forward-looking projection based on current MRR, not a sum of past revenue. It answers “if nothing changed, how much would you earn over the next year?” A company that started 3 months ago with $10K MRR has $120K ARR, even though total revenue collected is only $30K. Confusing ARR with trailing-twelve-months revenue is one of the most common SaaS reporting mistakes.
Does North Metric adjust the ARR multiplier for billing intervals?
No. The multiplier is always 12, regardless of whether your customers pay monthly, quarterly, or annually. A $1,200/year plan is already normalized to $100/month at the MRR level, then multiplied by 12 to get $1,200 ARR. The roundtrip is correct by construction — normalization happens once at the MRR layer, and ARR simply scales it.
What counts as “recurring” in ARR?
Only subscription revenue — charges that repeat on a predictable billing cycle. One-time fees, setup charges, implementation revenue, and usage-based overages are excluded. If it doesn’t recur, it doesn’t belong in ARR. North Metric derives this automatically from your Stripe subscription data, so non-recurring charges are filtered out during the MRR normalization step.
What is a good ARR growth rate?
The “triple triple double double” benchmark suggests tripling ARR from $1M to $3M to $9M, then doubling to $18M and $36M. Reality varies widely by market and stage. Focus on your MRR growth rate and net revenue retention — if retention is strong and growth is consistent, ARR milestones will follow naturally.
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