Frequently Asked Questions
How is ARR calculated?
ARR = MRR × 12. Or sum annual contract values for new bookings. Excludes one-time fees, professional services, usage overages. Some companies report "implied ARR" projecting current MRR forward - clarify which definition is used.
How is "new ARR" different from "growth"?
New ARR = newly booked annual revenue (gross). Growth = New ARR + Expansion - Churn = Net New ARR. New ARR shows sales team performance. Net new shows business health. Public SaaS reports both.
Why is ARR more useful than revenue?
ARR shows the run-rate of recurring business - what you'd earn if no new customers signed up and no existing ones changed. Revenue includes one-time items that can mask underlying SaaS health. Investors and acquirers value ARR multiples (5-15x) over revenue.
What is ARR and how does it differ from MRR?
MRR (monthly recurring revenue) is the monthly value of active subscriptions. ARR (annual recurring revenue) is MRR multiplied by 12: a projection of the annual value of your current contracts. Both exclude one-time fees, professional services, and implementation charges.
What does a 110% NRR mean?
It means existing customers from 12 months ago now generate 10% more revenue than they did back then, without counting any new customers. Upsells and expansion outpace churn and contraction. A 110% NRR means that even if you acquired no new customers at all, revenue would still grow 10% per year.
What is a good monthly churn rate?
For consumer/SMB SaaS, a monthly churn rate of 2-3% is typical (implying 75-80% annual retention). For enterprise/mid-market SaaS, aim for under 1% monthly (over 88% annual retention). Below 0.5% monthly in enterprise is best-in-class.
Should I include professional services revenue in ARR?
No. ARR should include only recurring, predictable subscription revenue. Professional services, implementations, training, and one-off projects are non-recurring (one-time) revenue that should not be annualized, because they distort the company's valuation.
How do I improve Net Revenue Retention?
The key levers are: reduce churn with stronger customer success and onboarding, run a proactive usage-based upsell and expansion program, flag at-risk accounts before they cancel, and design pricing plans that grow with customer success (for example, by seats, usage, or add-on modules).
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Business Information Disclaimer: Estimates only. Not professional business advice.
This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.