ARR (Annual Recurring Revenue)

The predictable recurring revenue your subscription business earns over a year — the headline number investors use to size the company and judge how fast it's scaling.

In plain English

ARR is the annual version of recurring revenue: the total subscription income you can expect to collect over a full year if nothing changed. It's the metric that turns "we make some money each month" into a single figure a board, an investor, or an acquirer can anchor on. Like MRR, it counts only the recurring part of the business — the contracts that renew — and ignores one-off charges. Because it's annualised, ARR is the natural language of enterprise and annual-contract SaaS, where customers commit for a year at a time and the monthly view would just be noise.

The formula

ARR = MRR × 12 (recurring revenue only)

It's simply your monthly recurring revenue scaled up to a year — so anything you correctly excluded from MRR (setup fees, services, overages) stays excluded from ARR too.

A worked example

Suppose your business books €48,000 of MRR this month. To express that as annual recurring revenue, multiply by twelve.

ARR = €48,000 MRR × 12 = €576,000

So you're running at €576,000 of ARR. If you triple that over the next year, you'd be approaching €1.7M — and that trajectory is exactly what growth-stage investors are pricing when they talk about your multiple.

What's a good ARR?

No absolute ARR is inherently "good" — what matters is how fast you compound it. The most-cited benchmark for venture-scale SaaS is T2D3: triple, triple, double, double, double:

Year	Growth milestone	Verdict
Year 1	Triple ARR (3×)	On the venture path
Year 2	Triple again (3×)	On the venture path
Years 3–5	Double each year (2×)	Strong, sustaining scale
Below this	Slower compounding	Fine for bootstrapped, light on for VC

T2D3 is aspirational, not a pass/fail line — plenty of healthy, profitable businesses grow slower. The honest read on ARR pairs the absolute number with your growth rate and your net revenue retention, which shows how much of next year's ARR you keep without winning a single new logo.

Frequently asked questions

How is ARR calculated?

ARR equals your monthly recurring revenue multiplied by 12. So €48,000 of MRR is €576,000 of ARR. Only recurring revenue counts — one-time fees, services, and usage overages are excluded because they don't repeat predictably each year.

What is the T2D3 growth path?

T2D3 is a benchmark for fast-growing SaaS: triple ARR in year one, triple again in year two, then double for three consecutive years. A company following it would grow from roughly €1M to over €70M ARR in five years. It's aspirational, not a requirement.

Should I report ARR or MRR?

It depends on how you bill. Annual-contract and enterprise businesses usually lead with ARR because their commitments are yearly. Monthly-billed and self-serve products lead with MRR because it reflects how revenue actually moves month to month. Both describe the same recurring revenue.

MRR · ACV · Bookings · MRR growth rate

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