ARR Calculator Formula
Understand the math behind the arr calculator. Each variable explained with a worked example.
Formulas Used
Annual Recurring Revenue (ARR)
arr = (monthly_subscriptions * 12) + annual_contracts + multi_year_annual_valueEquivalent MRR
mrr_equivalent = ((monthly_subscriptions * 12) + annual_contracts + multi_year_annual_value) / 12Monthly Subs as % of ARR
monthly_portion = ((monthly_subscriptions * 12) + annual_contracts + multi_year_annual_value) > 0 ? (monthly_subscriptions * 12) / ((monthly_subscriptions * 12) + annual_contracts + multi_year_annual_value) * 100 : 0Variables
| Variable | Description | Default |
|---|---|---|
monthly_subscriptions | Total Monthly Subscription Revenue(USD) | 50000 |
annual_contracts | Total Annual Contract Revenue(USD) | 200000 |
multi_year_annual_value | Multi-Year Deals (Annual Value)(USD) | 100000 |
How It Works
How to Calculate ARR
Formula
ARR = (Monthly Subscriptions x 12) + Annual Contracts + Multi-Year Deals (Annual Value)
ARR normalizes all recurring revenue streams to an annual figure. Monthly subscriptions get multiplied by 12, annual contracts are taken at face value, and multi-year deals are broken into their annual component. ARR excludes one-time fees like setup charges or professional services revenue.
Worked Example
A SaaS company earns $50,000/month from monthly plans, $200,000 from annual contracts, and $100,000/year from multi-year deals.
monthly_subscriptions = 50000annual_contracts = 200000multi_year_annual_value = 100000
- 01Monthly subs annualized = $50,000 x 12 = $600,000
- 02ARR = $600,000 + $200,000 + $100,000 = $900,000
- 03MRR Equivalent = $900,000 / 12 = $75,000
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