What Is Your Annual Recurring Revenue?
What this calculates
Annual recurring revenue is monthly recurring revenue multiplied by twelve, counting only subscription revenue that renews. This converts MRR to ARR, and takes new, expansion, contraction and churned MRR to produce net new ARR. One-time fees, setup charges and professional services stay out of both numbers.
A SaaS company at $120,000 in monthly recurring revenue is at $1.44 million ARR, and adding $4,000 of new and $1,800 of expansion against $600 of contraction and $3,000 of churn puts net new ARR at $26,400.
Your numbers
Current run rate
This month’s movement, optional
Results update as you type. Nothing is sent anywhere, the calculation runs in your browser.
Annual recurring revenue
Live$1,440,000
from $120,000 in MRR
- Net new MRR this month
- $2,200
- Net new ARR
- $26,400
- Implied annual growth
- 24.4%
- ARR in twelve months at this rate
- $1,790,779
Watch
Growth of 24.4% a year sits in the range around the 24% median SaaS Capital reports for private SaaS companies above $1m in ARR. Expansion supplies 31.0% of your gross additions, and 3.0% of MRR left through contraction and churn. The mix matters as much as the rate, because expansion revenue costs less to win than new revenue does.
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How is ARR calculated?
ARR is monthly recurring revenue multiplied by twelve. Net new ARR does the same to the month’s movement, adding new and expansion MRR, subtracting contraction and churn, then multiplying by twelve. The growth rate compounds one month across a year rather than multiplying it, which is the only version comparable to a published annual benchmark.
Formula
ARR = MRR × 12 Net new MRR = new + expansion − contraction − churned Net new ARR = net new MRR × 12 Implied annual growth = (1 + net new MRR ÷ MRR)12 − 1 Net new ARR divided by ARR gives 1.83% at these numbers. That is the monthly rate, not the annual one, because the twelve cancels top and bottom.
- Only revenue that recurs under contract is counted. Setup fees, one-time services, professional services and usage overages outside the subscription are excluded, because none of them renews on its own.
- ARR here is a run rate, not a bookings or revenue figure from your accounts. It states what a year looks like if this month repeats twelve times, which is a modeling assumption rather than a claim.
- Multiplying MRR by twelve assumes monthly billing. A company on annual contracts should divide contract value by twelve to get MRR first, otherwise the timing of renewals distorts the run rate.
- Contraction and churn are entered separately because they behave differently. A downgrade keeps the customer and a cancellation does not, and only one of them is recoverable with a pricing change.
- The growth rate assumes this single month repeats. One strong month reads as a strong year here, which is why it belongs beside a three-month average rather than in place of one.
When this number misleads
ARR flatters any company with lumpy revenue. A month carrying an annual prepayment, a large one-time implementation or a batch of renewals that all happen to land together will produce an ARR figure the following month cannot repeat. The tool cannot see which of your revenue is lumpy, so it takes the month you give it at face value. If more than a fifth of your revenue arrives outside a monthly subscription, run this on a three-month average and treat the single-month version as the optimistic case. The same distortion is why the KPI set a SaaS board actually reads puts growth rate and retention next to ARR rather than reporting ARR alone.
What is a good ARR growth rate for SaaS?
The median private SaaS company above $1 million in ARR grows at 24 percent a year. That figure comes from SaaS Capital’s 2025 benchmarking survey and it is the only published number in the band below. The two edges either side of it are my own guidance, not research, and they are labeled that way for a reason.
| Implied annual growth | Reading | Where the figure comes from |
|---|---|---|
| 35% and above | Ahead of the median | Practitioner guidance, roughly ten points over the median |
| 15% to 35% | Around the median | Built around SaaS Capital’s published median of 24% |
| Under 15% | Behind the median | Practitioner guidance, roughly ten points under the median |
SaaS Capital’s 2025 research puts the median growth rate at 24 percent across its survey of private SaaS companies with more than $1 million in ARR. It publishes the median but not the quartiles, which is why the two band edges here are practitioner guidance rather than data. I set them ten points either side of the published median, and you should replace them with your own if you have better numbers for your segment.
Why net new ARR and growth rate disagree
Net new ARR takes one month of net new MRR and multiplies it by twelve, which is the standard definition and the one this tool uses. Dividing that result by your current ARR looks like an annual growth rate and is not one. It is a monthly rate in disguise, because the twelve on the top and the twelve on the bottom cancel.
At the default numbers the difference is large. Net new ARR of $26,400 against $1,440,000 of ARR gives 1.83 percent, and that 1.83 percent is what your MRR grew by in one month. Compound it across twelve months and the same performance is 24.4 percent a year. The tool bands the compounded figure because that is the one comparable to a published growth benchmark, and it shows the naive ratio in the formula block so you can see which is which.
Both figures assume the month repeats, which no month does. Read them as a run rate rather than a forecast. The SaaS Valuation Calculator takes the ARR from this page and turns it into a valuation range, and growth rate is the single largest input to the multiple it applies.
Questions founders ask about this
What is the difference between ARR and revenue?
ARR is a run rate. It says what a year looks like if the current month repeats, counting only revenue that renews. Revenue is what you actually recognized over a period, including the one-time work ARR leaves out. A company can hold ARR flat and post rising revenue by selling more services, and the two numbers are both correct.
Should setup fees be included in ARR?
No. A setup fee is charged once and does not renew, so counting it inflates a figure whose whole purpose is to describe what recurs. The same applies to one-time migration work and to professional services. If you want those in a number, they belong in revenue rather than in ARR.
What is net new ARR?
It is the month’s movement annualized. Take new MRR plus expansion MRR, subtract contraction and churn, then multiply by twelve. At the default figures here that is $2,200 of net new MRR and $26,400 of net new ARR. It measures the direction of the run rate rather than its level.
Is net new ARR divided by ARR my growth rate?
No, although it is often presented that way. The twelve cancels on both sides, so the result is your monthly growth rate rather than your annual one. At these numbers the ratio gives 1.83 percent, and compounding the same month across a year gives 24.4 percent. The second figure is the one comparable to a published benchmark.
Do you store what I enter?
No. The calculation runs in your browser and nothing is transmitted. Your last inputs are saved in your own browser so the page remembers them when you return. If you use the email field, only the result summary and your address are sent.
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