ARR
Annual Recurring Revenue — the predictable revenue a SaaS or subscription business expects to receive every year from active subscriptions.
Example
“The SaaS startup grew ARR from $1M to $10M in two years, making it attractive to Series B investors.”
Memory Tip
ARR = how much subscription revenue repeats ANNUALLY. The key SaaS health metric.
Why It Matters
ARR helps you understand the true value of subscription services you use or sell by showing predictable annual income rather than monthly numbers. For personal finances, tracking ARR across your subscriptions reveals how much you commit to annually and helps identify spending patterns that compound over time.
Common Misconception
People often confuse ARR with total revenue, thinking it only counts money already received. In reality, ARR is forward-looking and represents expected revenue from active subscriptions, so it includes commitments customers have made even if payment has not yet been processed.
In Practice
A software company with 1,000 customers paying 100 dollars per month has an ARR of 1.2 million dollars because 1,000 multiplied by 100 multiplied by 12 equals 1.2 million. If 50 customers cancel each month but 80 new ones sign up, the ARR would grow steadily, giving investors confidence in the business even though individual months may show similar revenue.
Etymology
Acronym for Annual Recurring Revenue. ANNUAL (yearly) RECURRING (repeating) REVENUE.
Common Misspellings
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