ARR Calculator: Annual Recurring Revenue & Growth
Calculate Annual Recurring Revenue and month-over-month growth rate from MRR, new business, and expansion revenue.
Reviewed by Daniel Agrici, Founder & Lead Developer
Formula
ARR = MRR x 12 | Net New MRR = New + Expansion - Churn - Contraction
ARR is your Monthly Recurring Revenue annualized. Net New MRR combines all revenue movements: new customer revenue, expansion from existing customers, minus losses from churn and downgrades. Net Revenue Retention = (MRR + Expansion - Churn - Contraction) / MRR x 100.
Worked Examples
Example 1: Series A SaaS Company Metrics
Problem:A SaaS company has $50,000 MRR, $8,000 new MRR, $3,000 expansion MRR, $2,000 churned MRR, $1,000 contraction MRR, and 200 customers. Previous year ARR was $480,000.
Solution:Current ARR = $50,000 x 12 = $600,000\nNet New MRR = $8,000 + $3,000 - $2,000 - $1,000 = $8,000\nYoY Growth = ($600,000 - $480,000) / $480,000 = 25%\nMonthly Churn = $2,000 / $50,000 = 4.0%\nNet Retention = ($50,000 + $3,000 - $2,000 - $1,000) / $50,000 = 100%\nARPU = $50,000 / 200 = $250/mo
Result:ARR: $600,000 | Growth: 25% YoY | Net Retention: 100% | ARPU: $250/mo
Example 2: High-Growth SaaS Startup
Problem:A startup has $15,000 MRR, $5,000 new MRR, $1,500 expansion, $500 churn, $200 contraction, 50 customers. No previous year data.
Solution:Current ARR = $15,000 x 12 = $180,000\nNet New MRR = $5,000 + $1,500 - $500 - $200 = $5,800\nMonthly Growth = $5,800 / $15,000 = 38.7%\nChurn Rate = $500 / $15,000 = 3.3%\nNet Retention = ($15,000 + $1,500 - $500 - $200) / $15,000 = 105.3%\nARPU = $15,000 / 50 = $300/mo\nProjected 12mo ARR = ~$180K x growth = significant growth
Result:ARR: $180,000 | Monthly Growth: 38.7% | Net Retention: 105.3% | ARPU: $300/mo
Frequently Asked Questions
What is ARR and how is it different from MRR?
ARR stands for Annual Recurring Revenue and represents the total recurring revenue a business expects to earn over a 12-month period. It is calculated by multiplying your Monthly Recurring Revenue (MRR) by 12. While MRR provides a monthly snapshot of subscription revenue, ARR gives investors and stakeholders a normalized annual view that is easier to compare against annual benchmarks and industry standards. ARR is the primary revenue metric for SaaS companies, especially those with annual subscription contracts. MRR is more useful for tracking month-to-month operational performance and detecting trends quickly. Both exclude one-time fees, setup charges, and variable or consumption-based revenue that is not guaranteed to recur.
What is net revenue retention and why does it matter?
Net Revenue Retention (NRR), also called Net Dollar Retention, measures how much revenue you retain and expand from existing customers over a period, excluding new customer acquisition. The formula is: NRR = (Starting MRR + Expansion minus Churn minus Contraction) divided by Starting MRR times 100. An NRR above 100% means your existing customers are spending more over time, generating organic growth even without new customers. Elite SaaS companies achieve NRR of 120-140%, meaning they grow 20-40% annually from existing customers alone. Investors consider NRR one of the most important SaaS metrics because it demonstrates product stickiness, pricing power, and the efficiency of your land-and-expand strategy without requiring additional customer acquisition spend.
What is a good ARR growth rate for SaaS companies?
ARR growth expectations vary significantly by company stage. Early-stage startups with less than $1 million ARR should target tripling (200%+ growth) annually, often called T2D3 growth (triple, triple, double, double, double over five years). Companies at $1-10 million ARR typically grow 100-200% annually. At $10-50 million ARR, 50-100% growth is strong. Companies above $50 million ARR growing at 30-50% are considered high performers. The Rule of 40 is a common benchmark: a healthy SaaS company should have its growth rate plus profit margin exceed 40%. For example, 50% growth with negative 10% margins equals 40, which is the minimum. Bessemer Venture Partners publishes annual benchmarks showing median growth rates by ARR scale.
How do I calculate customer lifetime value from ARR metrics?
Customer Lifetime Value (LTV) from ARR metrics can be estimated using average revenue per account and churn rate. The simple formula is LTV = ARPU divided by monthly churn rate, or equivalently, Annual ARPU divided by annual churn rate. For example, if your ARPU is $500 per month and monthly churn is 2%, then LTV = $500 / 0.02 = $25,000. For companies with strong net revenue retention above 100%, a more nuanced formula accounts for expansion: LTV = ARPU divided by (Gross Churn Rate minus Expansion Rate). The LTV to CAC (Customer Acquisition Cost) ratio is a critical efficiency metric, with 3:1 or higher considered healthy for venture-backed SaaS. A ratio below 1:1 means you spend more to acquire customers than they generate in lifetime value.
References
Reviewed by Daniel Agrici, Founder & Lead Developer · Editorial policy