Convert your MRR into Annual Recurring Revenue, then project where ARR lands in 12 months given your growth and churn.
MRR from month-to-month subscriptions.
Annual contracts divided by 12.
New MRR added each month as % of base.
MRR lost each month as % of base.
Month-by-month, adding new MRR from growth and removing churned MRR from your current base.
| Month | MRR | New MRR | Churned MRR | ARR run-rate |
|---|
Quick conversions — ARR is always MRR × 12.
| MRR | ARR |
|---|
MRR and ARR measure the same thing on different timescales. MRR is your monthly recurring run-rate; ARR is that same run-rate annualised. Neither is what you've actually banked — they're forward-looking snapshots of recurring subscriptions at one moment.
Month-to-month businesses tend to live in MRR. Companies with annual contracts and enterprise deals usually report ARR, because their revenue lands in larger, less frequent chunks.
ARR = Total MRR × 12 Example: $30K monthly plans + $20K annual-equivalent = $50K MRR:
ARR annualises your current recurring revenue. It assumes nothing changes. It is not the revenue you recognised last year, and it excludes one-off fees, services, and overages.
A 10% gross growth rate undone by 8% churn nets just 2%. The projection here subtracts churned MRR every month, so it shows real net movement, not a vanity growth figure.
Annual Recurring Revenue is simply your total Monthly Recurring Revenue multiplied by 12. If your MRR is $50,000, your ARR is $600,000. ARR captures the annualised run-rate of your recurring subscriptions at a single point in time, not the revenue you've actually booked over the past year.
Yes. Normalise annual contracts to their monthly equivalent before summing MRR. A $12,000 annual plan counts as $1,000 of MRR. Add that to your month-to-month plans, then multiply the combined total by 12. This keeps every subscription on the same monthly basis so ARR reflects the true run-rate.
ARR is a forward-looking run-rate: your current recurring subscriptions annualised. Revenue (GAAP) is what you actually earned over a past period, including one-off fees, services, and overages. ARR only counts recurring subscription revenue. A company can have $1M ARR but report different recognised revenue depending on timing and non-recurring items.
No. ARR is strictly recurring. Setup fees, professional services, one-off overages, and hardware sales are excluded because they don't repeat predictably. Mixing them in inflates your run-rate and makes growth look better than it is. Keep ARR clean so it actually predicts next year's recurring base.
We step through 12 months. Each month we add new MRR equal to your growth rate applied to the current base, then subtract churned MRR equal to your churn rate applied to the current base. The ending MRR after 12 months is multiplied by 12 to give projected ARR. It's a simple model — real growth is lumpier — but it shows the compounding effect of net new MRR.
It depends on stage. Early-stage SaaS often targets 100%+ year-over-year growth, while later-stage companies celebrate 30-50%. What matters more than the headline is net growth after churn: a high gross growth rate undone by high churn leaves you treading water. Track new MRR and churned MRR separately to see the real picture.
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