ARR
Annual Recurring Revenue
In one line
Annual recurring revenue (ARR) is recurring revenue normalised to a yearly view — the standard yardstick investors use to size a SaaS business.
Going deeper
ARR is recurring revenue expressed on a yearly basis — either MRR x 12 or the sum of annual contract values. It is the default size metric in SaaS, which is why every investor pitch and board deck leads with it.
Most teams split ARR into New, Expansion, Contraction and Churn, then track 'Net New ARR' as the headline KPI. Quarter over quarter, that single line tends to expose how much real growth sales and marketing are creating.
ARR and GAAP revenue often diverge. An upfront annual payment recognises revenue over 12 months on the income statement, but ARR books the full amount immediately, so the two numbers won't match.
Related terms
MRR
Monthly recurring revenue (MRR) is the sum of subscription revenue you can reliably expect each month — the headline growth signal for any subscription or SaaS business.
MarketingNRR
Net revenue retention (NRR) measures how much of last year's customer cohort revenue you've kept and grown a year later — the cleanest single read on SaaS business health.
MarketingLTV
Lifetime value (LTV) is the estimated total revenue — or profit — a single customer is expected to generate over the entire relationship with your business.
MarketingCAC
Customer acquisition cost (CAC) is the total marketing and sales spend required to win one new paying customer.
MarketingLTV:CAC Ratio
The LTV:CAC ratio compares lifetime value to acquisition cost — the single cleanest test of whether a growth engine has healthy unit economics.
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