SaaS Marketing
ARR (Annual Recurring Revenue)
Quick definition
ARR is the annualized value of a SaaS company's recurring subscription revenue — MRR × 12.
ARR is the standard top-line metric used by SaaS boards, investors, and most enterprise sales teams. It's the cleanest single number for measuring SaaS growth.
Why ARR (Annual Recurring Revenue) matters
ARR excludes one-time setup fees, services revenue, and other non-recurring income. It reflects only the subscription engine.
How ARR (Annual Recurring Revenue) works in practice
Compare year-over-year ARR growth rates against the SaaS Rule of 40 (growth rate + profit margin ≥ 40%) to gauge whether a business is growth-efficient.
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Related terms
MRR (Monthly Recurring Revenue)
MRR is the predictable monthly revenue a SaaS business earns from active subscriptions — the most-tracked top-line SaaS metric.
Net Revenue Retention
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn.
SaaS
SaaS (Software as a Service) is a software delivery model where applications are hosted by the vendor and accessed by customers over the internet, typically on a subscription basis.