ARR Calculator (Annual Recurring Revenue)

Annual recurring revenue is the number SaaS companies are valued on, hired on, and judged by — a single run-rate that says what the subscription base is worth over a year. This calculator builds ARR properly: from net MRR after expansion, contraction, and churn, plus any annual-contract revenue, with year-over-year growth, a valuation range, and a gap-to-target analysis.

How It Works

$\text{Net MRR} = \text{Base MRR} + \text{Expansion} - \text{Contraction} - \text{Churned}$

$\text{ARR} = (\text{Net MRR} \times 12) + \text{Annual contracts}$

The components deserve their definitions, because ARR quality lives in them. Base MRR is the recurring revenue you start with. Expansion is growth from the existing base — upgrades, added seats, add-ons. Contraction is downgrades by customers who stay. Churned MRR is revenue from customers who left entirely. Annual contracts captures recurring revenue billed annually that never appears in MRR, added after annualizing. From the ARR flow the run-rate views: implied MRR (ARR ÷ 12), daily revenue (ARR ÷ 365), and — the figure founders quote carefully — an indicative valuation range at 5×–10× ARR, the band growth-stage SaaS commonly trades in. Add a previous ARR for year-over-year growth, and a target ARR for a gap analysis: the run-rate MRR the target requires, and the monthly gap you must close.

Worked Example

Base MRR $50,000**, expansion **$1,000, contraction $500**, churned **$2,000:

• Net MRR: 50,000 + 1,000 − 500 − 2,000 = $48,500
• ARR: 48,500 × 12 = **$582,000** (daily revenue$1,594.52)
• Valuation band: $2.91M –$5.82M
• Against a previous ARR of $450,000: +29.3% YoY
• Against a $1,000,000 target: required MRR run-rate$83,333 — a gap of **$34,833 of MRR** ($418,000 of ARR) to close

Note what the movements say beyond the total: leakage (contraction + churn) ran at $2,500 against$1,000 of expansion — this base shrinks on its own, so growth is being bought entirely with new sales effort. The celebrated opposite is net negative churn, when expansion exceeds contraction plus churn and the base compounds by itself; watch the sign of (expansion − contraction − churn) every month, because it, more than the ARR level, predicts whether growth gets easier or harder.

Discipline: What Belongs in ARR

ARR counts contracted, recurring revenue only. Exclude one-time setup and onboarding fees, consulting and services, hardware, and usage overages that are not contractually committed (committed minimums count; true pay-as-you-go spikes do not). Annualize honestly: a customer on a 6-month pilot is not 12 months of revenue, and a discounted first year annualizes at the discounted rate until renewal proves otherwise. MRR-based businesses (consumer subscriptions, monthly billing) conventionally report MRR and let ARR be the derived ×12 view; annual-contract enterprise businesses measure ARR directly from contract values — mixing the two without the annual-contracts line is how run-rates get double-counted. And remember ARR is a snapshot run-rate, not revenue recognized: $582,000 of ARR on 1 January does not promise$582,000 of cash by December — churn, contraction, and defaults all get their vote during the year. The valuation band deserves the same sobriety: 5×–10× frames growth-stage, healthy-retention companies; public-market and low-growth SaaS often trade well below it, and exceptional growth well above. Treat it as the calculator presents it — an orientation range, not an appraisal.

Frequently Asked Questions

Why does new-customer MRR not have its own input?

Because in this model it belongs inside base MRR by the time you measure the run-rate: the flow inputs (expansion, contraction, churn) describe how the existing base moved, and the net MRR that results is current total MRR, new logos included. If you are building the figure month by month, add new MRR into the base for the month it lands.

ARR or MRR — which should my company report?

Report the one matching your contract rhythm: annual enterprise contracts → ARR; monthly consumer or self-serve subscriptions → MRR. Investors will annualize MRR themselves if you give them MRR — what they will not forgive is inconsistency in definition between reports.

How can ARR rise while the business gets worse?

By masking leakage with new sales: net MRR can grow while churn quietly accelerates, until the sales effort needed to stand still becomes unsustainable. That is why the calculator exposes the components rather than just the total — growth bought over a leaking base and growth on a compounding base have identical ARRs and very different futures.