How to calculate MRR and ARR
Learn how to calculate MRR and ARR, what should count as recurring revenue, and how to use both metrics in SaaS and subscription planning.
MRR and ARR are two of the most common recurring-revenue metrics in SaaS and subscription businesses. MRR gives you the cleaner operating view, while ARR gives you the annualized lens.
The calculation itself is simple, but the real challenge is being consistent about what counts as recurring revenue and what should stay outside the metric.
Core formulas
MRR = Active Accounts × Average Monthly Revenue Per Account, ARR = MRR × 12
These formulas work well when you want a clean recurring-revenue estimate from active accounts and recurring value per account.
One-time services, setup fees, and irregular charges are usually excluded so the metric stays focused on recurring economics.
How to calculate MRR and ARR correctly
- 1Decide which revenue qualifies as truly recurring before doing the calculation.
- 2Count active paying accounts for the period you are analyzing.
- 3Estimate average monthly revenue per account and multiply it by active accounts to get MRR.
- 4Multiply MRR by 12 to estimate ARR, then review both alongside churn and retention so the revenue view stays grounded in customer stability.
Worked example: calculating MRR and ARR from accounts and ARPA
- Active accounts: 450
- Average monthly revenue per account: $180
- MRR = $81,000
- ARR = $972,000
The business is generating about eighty-one thousand dollars in recurring monthly revenue, which annualizes to roughly nine hundred seventy-two thousand dollars in ARR at the current run rate.
What matters in practice
- MRR is usually better for operating visibility and ARR is better for annualized planning.
- Consistency matters more than metric complexity when deciding what to include in recurring revenue.
- MRR and ARR become more useful when paired with churn, retention, and monetization-per-account metrics.
Relevant calculators
Use these tools to apply the formulas and comparisons from this guide.
Monthly Recurring Revenue Calculator
↗Calculate MRR from active accounts and average monthly revenue per account so you can quantify recurring revenue on a clean monthly basis.
Annual Recurring Revenue Calculator
↗Calculate ARR from active accounts and average monthly revenue per account so you can turn recurring monthly performance into a cleaner annual run-rate view.
Average Revenue Per Account Calculator
↗Calculate average revenue per account from total recurring revenue and active accounts so you can see how much recurring value each customer account contributes on average.
Churn Rate Calculator
↗Calculate churn rate from starting customers and churned customers so you can measure how much of your customer base you are losing during a period.
Retention Rate Calculator
↗Calculate retention rate from starting customers and retained customers so you can measure how much of your customer base stayed with you during the period.
Related guides
Churn vs retention explained
↗Learn the difference between churn and retention, how the two metrics work together, and why recurring-revenue businesses need both views at the same time.
What is a good LTV:CAC ratio?
↗Learn how to judge LTV:CAC ratio in context, why a bigger ratio is not always enough, and how payback timing changes what healthy really looks like.
LTV:CAC ratio explained
↗Learn what the LTV:CAC ratio means, how to calculate it, and why it is more useful when paired with payback period and realistic lifetime value assumptions.
Related topic hubs
If you want a broader starting point, these topic hubs group the most relevant calculators and guides around the same question set.
FAQ
Should one-time fees count in MRR or ARR?+
Usually no. The cleaner recurring-revenue view usually excludes one-time fees so MRR and ARR stay comparable over time.
Why use both MRR and ARR?+
MRR is easier for operational month-to-month management, while ARR gives a cleaner annualized view for planning and high-level reporting.
Can ARR look healthy while the business is weakening?+
Yes. ARR can look clean even when churn, retention, or monthly growth quality is deteriorating underneath the surface.
What should I pair with MRR and ARR?+
Review churn, retention, ARPA, CAC, and lifetime value so recurring revenue is tied back to customer and acquisition economics.