What is ARR (annual recurring revenue)?
How is ARR calculated?
ARR is the annual view of recurring revenue. The usual route is to work out monthly recurring revenue first, then multiply by twelve. If a business has 2,100 in MRR, its ARR is 2,100 × 12 = 25,200. Because it is built from the current recurring base, ARR is a run-rate: a snapshot of where the business would land over a year if nothing changed, not a prediction of what will actually be booked.
What's the difference between ARR and MRR?
They measure the same recurring revenue over different windows. MRR is the monthly figure teams watch for fast operational signal, and ARR is that figure annualised for planning and reporting. Neither includes one-off charges. A company might quote 25,200 ARR to its board while tracking the underlying 2,100 MRR week to week to see how new signups and cancellations move the number.
Why doesn't ARR match my total revenue?
ARR isolates recurring subscription revenue, so it deliberately excludes setup fees, one-off services, and irregular usage charges. Your total revenue on the profit and loss statement counts all of those. A business with 25,200 in ARR might record more than that in total revenue once it adds a large one-off implementation fee. The difference is a feature of the metric, not an error to chase down.
Reading ARR from an export
ARR is usually derived from the same subscriptions export used for MRR, such as a CSV pulled from Stripe. You sum active monthly fees, convert annual plans to their monthly share, and multiply the total by twelve. Instead of building that calculation by hand, you can open the file and ask for it in plain English. Paperswift analyses the export in your browser, and only your column names and their types are ever sent when you ask, never the values in your rows.
Frequently asked questions
Is ARR just MRR times twelve?+
For most subscription businesses, yes. ARR takes the current monthly recurring revenue and projects it across a full year by multiplying by twelve. It assumes the recurring base holds steady, so it is a run-rate rather than a forecast. Actual booked revenue for the year will differ once churn, expansion, and new signups are counted.
What does ARR leave out?+
ARR counts only recurring subscription revenue. It excludes one-off setup fees, professional services, usage overages billed irregularly, and any non-recurring charges. Because of this it usually sits below the total revenue on your income statement. The gap is expected, since ARR is meant to isolate the predictable subscription base rather than every dollar collected.
When should I use ARR instead of MRR?+
Use ARR when the audience thinks in annual terms: investors, board members, and annual planning. It is the standard figure for valuation and growth comparisons between companies. Use monthly recurring revenue for operational tracking, where you want the fastest signal on how signups, churn, and expansion moved the business this month.
How do I estimate ARR from an export?+
Sum the monthly fee of every active subscription to get monthly recurring revenue, converting annual plans to their monthly share, then multiply by twelve. Working from a subscriptions export, a plain-language tool can return this directly, using only your column names and their types, never the values held in your rows.
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Start free todayLast updated · by Stefan