ARR formula
ARR = MRR x 12
Use committed recurring subscription revenue. Avoid inflating ARR with usage spikes, one-time services, or non-recurring setup fees.
ARR vs revenue
ARR is a run-rate metric for recurring revenue. Accounting revenue can differ because of recognition timing, one-time fees, discounts, refunds, and contract terms.
ARR and churn
ARR can look strong while churn is rising. Pair ARR with churn, expansion, LTV/CAC, and CAC payback to understand business quality.