ARR means annual recurring revenue: the yearly value of your active subscriptions. Work it out from MRR or customers, or see how new, expansion and churned revenue moved it.
Your ARR
$600,000
$50,000 of monthly recurring revenue is $600,000 a year.
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Multiply monthly recurring revenue by 12, or add up the annual value of every active subscription. Leave out one-time fees, setup charges and usage you can’t count on. A company with $50,000 of MRR has $600,000 of ARR. To see what changed, start from last period’s ARR and add each movement.
A hypothetical SaaS company starts the year on $600,000 of ARR. During the year it adds $120,000 from new customers and $30,000 from upgrades, then loses $10,000 to downgrades and $40,000 to cancellations.
ARR grew, but existing customers shrank. New sales did all of the work, so retention is the place to look first.
It depends on size. SaaS Capital’s 2026 survey of over 1,000 private B2B SaaS companies puts median growth at 22% in 2025, from 40% under $1 million ARR to 20% above $20 million. A company with $2 million of ARR needs close to 50% growth to reach the top quartile.
| ARR band | Median growth |
|---|---|
| Under $1 millionTop quartile starts at 100%. SaaS Capital | 40% |
| $1 million to $3 millionTop quartile starts at 48%. SaaS Capital | 25% |
| $3 million to $5 millionTop quartile starts at 39%. SaaS Capital | 20% |
| $5 million to $10 millionTop quartile starts at 35%. SaaS Capital | 19% |
| $10 million to $20 millionTop quartile starts at 39%. SaaS Capital | 22% |
| Over $20 millionTop quartile starts at 31%. SaaS Capital | 20% |
| All companiesSaaS Capital | 22% |
For retention, SaaS Capital’s 2025 survey puts median net revenue retention at 101% and median gross revenue retention at 91%.
ARR stands for annual recurring revenue. It’s the yearly value of the subscriptions and contracts a company has active right now, shown as a run rate. SaaS and subscription businesses use it because it shows revenue they can expect to repeat. One-time fees and services stay out of it.
ARR is the yearly figure and MRR is the monthly one, and ARR is usually MRR times 12. Companies on annual contracts tend to report ARR, while companies on monthly plans watch MRR because it shows changes sooner. Both measure the same recurring revenue, so pick one and define it once.
ARR is a forward-looking run rate, and revenue is what you’ve earned in the period. A customer who signs a $12,000 annual contract in December adds $12,000 of ARR straight away, but only about $1,000 to that year’s revenue. Investors watch ARR, and your accounts report revenue.
Divide the contract’s total value by its length in years. A three-year deal worth $90,000 counts as $30,000 of ARR, whenever the invoice lands. Spread any discount across the term. If the price steps up each year, agree one rule for your team and write it down so the number stays comparable.
Only the part you can count on. Committed minimums belong in ARR, because the customer has agreed to pay them. Overage and pay-as-you-go spend swing from month to month, so many teams report them separately. Whatever you choose, keep the rule the same each period so growth rates stay honest.
If ARR changes depending on who pulls it, the fix is one definition in one place. Our data warehouse work sets that up at a fixed price.
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<p style="font-size:13px">Free tool by <a href="https://www.martechdevs.com/tools/arr-calculator">martechdevs</a></p>Last updated
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