ARR (Annual recurring revenue)
ARR, annual recurring revenue, is the yearly value of the subscriptions you have right now, usually calculated as monthly recurring revenue multiplied by twelve.
Worked example (made-up numbers)
You have 30 customers on a $20 monthly plan and 5 on a $240 yearly plan.
- Monthly plans: 30 × $20 = $600 a month.
- Yearly plans, spread over the year: 5 × $240 ÷ 12 = $100 a month.
- MRR: $700. ARR: $700 × 12 = $8,400.
The yearly customers paid $1,200 up front, but they count as $100 a month, because that’s what their subscriptions are worth per month.
What to leave out
ARR counts only revenue that repeats on its own:
- Leave out one-time payments: setup fees, lifetime deals, one-off purchases.
- Leave out usage you can’t count on: a customer’s unusually large month of overage.
- Leave out trials and discounts that end soon at their current value; count what they’ll pay after, once they do.
- Take out cancelled subscriptions even if they’re paid until the end of the period.
Mixing one-time money into ARR is the most common way founders fool themselves with it.
ARR or MRR?
They’re the same number at a different scale. ARR is common in fundraising and for products sold on yearly contracts. For a first product with monthly plans and a few dozen customers, MRR is easier to read, because it’s in the unit your customers pay in. The two always move together, so pick one and stick to it.
Why it matters when you’re starting out
Recurring revenue is what lets you plan: rent, hosting, maybe quitting a job. ARR puts that in the same unit as a salary, which makes it a useful gut check (“is this a hobby or a living yet?”). It doesn’t say whether you’re growing; for that, compare it month to month, and look at new, lost and expanded revenue separately.
How to measure it
- Work out MRR: each active subscription’s price converted to a monthly amount, summed.
- Multiply by twelve.
- Keep currencies apart, or convert them at one fixed rate.
In Nordva Launch
Launch reads your Stripe subscriptions (read-only, every plan) and shows MRR per currency, with the number of new and cancelled subscriptions and the net change in MRR (the API and the MCP server also give new and churned MRR separately). Yearly plans are spread over twelve months. Launch shows MRR rather than ARR; multiply by twelve when you need the yearly figure.