ARR (Annual Recurring Revenue)

Annual Recurring Revenue (ARR) is the annualized value of a company's recurring subscription contracts. It is calculated by taking the monthly recurring revenue (MRR) and multiplying by 12, or by summing all active annual contract values. ARR only includes predictable, recurring revenue: one-time fees, professional services, and variable usage charges are excluded.

ARR is the single most important metric for SaaS businesses. Investors use ARR growth rate to benchmark companies against peers, with "good" growth rates varying by stage: early-stage companies (under $1M ARR) should be growing 3x+ annually, while later-stage companies ($10M+ ARR) are strong at 50-100% growth. The "Triple Triple Double Double Double" benchmark suggests tripling ARR twice (to $1M then $3M) then doubling three times ($6M, $12M, $24M).

Common mistakes in ARR calculation include counting annual prepayments as ARR when the underlying commitment is monthly, including one-time setup fees, or counting contracted but not yet live customers. Clean ARR calculations matter because investors will verify the number during due diligence, and discrepancies erode trust quickly.