How to calculate ARR
Annualize recurring revenue and test a growth path.
1
Enter MRR
Use recurring subscription revenue for the current month.
2
Normalize contracts
Convert quarterly or annual plans to a monthly equivalent.
3
Project growth
Use a conservative growth rate and check the horizon.
What does this tool do?
Annual recurring revenue is the yearly value of subscription or contract revenue that repeats. It is a snapshot of run-rate revenue, so one-time fees and usage spikes should be excluded to keep it comparable over time.
The Formula
ARR = MRR × 12; Projected ARR = MRR × (1 + Growth)^Months × 12Frequently Asked Questions
How is ARR different from annual revenue?
ARR annualizes recurring subscription revenue at the current run rate. Annual revenue is actual recognised revenue for the year and can include one-time and professional services income.
Should annual contracts be divided by 12?
Yes. Normalize contract value to a monthly equivalent, then multiply by 12 so different billing frequencies are comparable.