What is ARR? Formula and examples

ARR (annual recurring revenue) is the yearly value of the subscriptions you have today: your MRR × 12. A business with $2,500 in monthly recurring revenue has $30,000 ARR. Like MRR, it counts only active, paid subscriptions, so trials, one-off payments and cancelled plans are left out.

ARR is a snapshot, not a history. It says what your current subscriptions would bring in over a year if nothing changed, which is why it is the base for most SaaS valuation multiples.

What is the ARR formula?

ARR = MRR × 12. Work out MRR first, by converting every active subscription to a monthly amount and adding them up, then multiply by twelve.

Plan	Price	Monthly amount (MRR)	Yearly amount (ARR)
Monthly	$29 a month	$29	$348
Yearly	$240 a year	$20	$240
Quarterly	$75 a quarter	$25	$300
Weekly	$5 a week	$21.67	$260

A yearly plan adds its full price to ARR. A monthly plan adds twelve times its price. The weekly row uses 52 weeks ÷ 12 months, about 4.33 weeks a month. (The MRR guide covers every conversion in detail.)

A worked ARR example

Say a small SaaS has these customers at the end of the month:

• 40 customers on $19 a month: $760 MRR
• 15 customers on $190 a year: $15.83 MRR each, $237.50 in total
• 6 customers in a free trial: $0
• 1 customer who paid $299 for a lifetime deal: $0

MRR is $760 + $237.50 = $997.50, so ARR is $997.50 × 12 = $11,970.

The trial users and the lifetime deal don't count. The lifetime deal is real revenue, but it won't recur, so it doesn't belong in a recurring number.

What is the difference between ARR and revenue?

ARR is a forward-looking run rate; revenue is money you actually received. Revenue for the last twelve months (often called TTM or LTM revenue) includes one-off payments and annual plans in the month they were paid, minus refunds. ARR includes none of that history. It is today's subscriptions, annualised.

The two drift apart in both directions:

• A growing business has ARR above its last-twelve-months revenue, because today's subscriptions are worth more than the average month last year.
• A shrinking business, or one that sold many lifetime deals, has revenue above ARR.

Buyers look at both: ARR to see what the business earns going forward, and twelve months of revenue matched to bank deposits to check that the ARR is real.

What is the difference between ARR and run rate?

ARR counts only recurring subscriptions; run rate annualises all revenue from a recent period. A "revenue run rate" of last month × 12 includes one-off sales, setup fees and anything else that came in, so it is larger and less reliable. If a seller quotes a "run rate", ask which of the two they mean.

On VerifyArr, the annual run rate shown on a startup page is the verified MRR × 12, so it is the same as ARR.

When should you use ARR instead of MRR?

Use MRR for small, month-to-month businesses and ARR when talking valuation or annual contracts. Most indie SaaS and subscription apps track MRR, because it moves every month and shows churn quickly. ARR is the number valuations and B2B companies speak in:

• Valuation multiples are usually quoted on ARR. A business asking $36,000 with $12,000 ARR is priced at 3× ARR. VerifyArr shows every listing's asking price as a multiple of ARR, and the stats page shows the median by category.
• Annual contracts fit ARR naturally, since a $12,000 yearly contract is $12,000 ARR.

For what multiples small businesses actually sell at, see how much a SaaS is worth.

What counts towards ARR?

Exactly what counts towards MRR:

Counts	Doesn't count
Active paid subscriptions, any billing period	Free trials
Subscriptions with a recurring discount, at the discounted price	One-off payments and lifetime deals
Past-due subscriptions still being retried	Cancelled or expired subscriptions
	Setup fees, refunds, usage spikes that don't recur

Discounts matter: a $50 plan with a permanent 20% coupon adds $40 a month, or $480 a year.

Frequently asked questions

Is ARR the same as annual revenue?

No. Annual revenue is what you received over a year, one-off payments included. ARR is what your current subscriptions are worth over a year.

How do I calculate ARR from MRR?

Multiply by twelve. $4,000 MRR is $48,000 ARR.

Does ARR include churn?

Not directly. ARR is a snapshot, so customers who already left aren't in it, but it doesn't predict who will leave next. Look at churn rate alongside it.

Why do investors and buyers prefer ARR?

Because valuation multiples are quoted on a yearly figure, and because ARR ignores one-off spikes that make revenue look better than the business really is.

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If you want a verified MRR and ARR to show buyers or your audience, connect Stripe or RevenueCat to VerifyArr. It is free, read-only and updates every hour.