Annual Recurring Revenue (ARR)
The annualized value of recurring revenue from subscriptions, calculated as MRR multiplied by 12.
What is Annual Recurring Revenue (ARR)?
ARR is MRR scaled to a yearly figure. If your MRR is $50,000, your ARR is $600,000. It's the standard metric investors use to benchmark SaaS companies against each other.
ARR milestones ($1M ARR, $10M ARR) are common fundraising benchmarks. Reaching $1M ARR is often considered "product-market fit" in SaaS, though the threshold varies by market.
Like MRR, ARR only includes recurring revenue — not one-time fees, professional services, or variable usage-based charges (unless they're predictable).
Why it matters
ARR is the language investors speak. When a VC asks "what's your ARR?" they're trying to size your business and compare it to portfolio benchmarks. It's also used to calculate valuation multiples — a company at $2M ARR with a 15x multiple has a $30M valuation.
For founders, ARR provides a long-term view of revenue trajectory that complements the monthly granularity of MRR.
Formula
ARR = MRR × 12
Example
Your MRR is $42,000. Your ARR = $42,000 × 12 = $504,000. If you grow MRR by 10% per month, in 6 months your MRR would be ~$74,400, putting you at ~$893,000 ARR.
How RunwayCal helps
RunwayCal computes committed MRR from your deal pipeline and displays equivalent ARR metrics. The revenue model projects forward-looking growth based on assumptions you define.
Common mistakes
- 1Including non-recurring revenue in ARR calculations
- 2Projecting ARR by annualizing a single strong month instead of using a trailing average
- 3Not accounting for churn when projecting forward ARR
Project your ARR trajectory with real data
RunwayCal models revenue growth from your actual deal pipeline — no guesswork, just arithmetic from the numbers you define.
Model your revenue growth → Start free