Annual Recurring Revenue (ARR)

Repeating income — often subscription-based — for one calendar year.

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Repeating income — often subscription-based — for one calendar year.

The formula for ARR is simple: ARR = (Overall Subscription Cost Per Year + Recurring Revenue From Add-ons or Upgrades) - Revenue Lost from Cancellations.

This number is helpful in determining future growth and revenue; it helps set realistic goals.

For subscription services like Hulu and Netflix, ARR is a key figure. While their recurring revenue is monthly (thus providing an MRR – Monthly Recurring Revenue), such companies can multiply that revenue by 12 and follow the ARR formula.

Last updated: 2021/08/04