Annual Recurring Revenue (ARR)

ARR is your MRR multiplied by 12. That's it. If your MRR is $10,000, your ARR is $120,000. It gives you a full-year view of subscription revenue, assuming nothing changes. Investors, board decks, annual planning: ARR is the number everyone reaches for first.

When to use ARR vs MRR

They measure the same thing at different time scales. In practice, MRR is more useful for tracking month-to-month movements and making operational decisions. ARR is what you quote during fundraising, what analysts use to compare SaaS companies, and what drives your valuation multiple.

If you primarily sell annual contracts, ARR is the natural metric. For monthly subscriptions, MRR gives you the real-time picture and ARR becomes a useful projection for longer-term planning.

Protecting your ARR

Every customer lost to churn directly reduces your ARR. Here's the thing: a 5% monthly churn rate translates to losing roughly 46% of your ARR over a year through customer attrition alone. We see this catch founders off guard because monthly churn numbers look manageable until you annualise them. Reducing involuntary churn through dunning is one of the most direct ways to protect and grow your ARR without spending more on acquisition.

You can model your own ARR from subscription tiers with our ARR calculator, see how ARR feeds into company valuation with the SaaS valuation calculator, or check how your growth and profitability stack up with the Rule of 40.

ARR benchmarks and milestones

The $1M ARR mark is the milestone everyone talks about. It's the point where most investors consider a SaaS company "real" and where unit economics become easier to evaluate. Getting there is hard. Staying there while maintaining healthy growth is harder.

Growth expectations scale with stage. Early-stage companies (under $1M ARR) are often expected to triple year over year. The T2D3 framework, widely cited in venture circles, describes the ideal trajectory: triple, triple, double, double, double. That means going from $1M to $3M, then $9M, then $18M, $36M, and $72M ARR over five years. Very few companies actually hit that curve, but it's the benchmark investors use.

For most B2B SaaS, median year-over-year ARR growth rates look something like this: 100-200% under $1M ARR, 80-100% from $1-5M, 50-80% from $5-20M, and 30-50% above $20M. These numbers come from OpenView's annual SaaS benchmarks and broadly align with what KeyBanc reports. The pattern is consistent: growth rates decelerate as the base gets larger, and that's normal.