What is ARR?
Annual recurring revenue — the yearly value of active recurring contracts, usually MRR × 12.
ARR — annual recurring revenue — is the yearly value of the recurring, contracted part of the business: subscriptions under term, not one-off services, not usage overages unless they're committed. It's the headline SaaS metric because it's the number growth rates, valuation multiples, and board targets are quoted against.
Two conventions coexist. MRR × 12 is the operating view — take the latest month's recurring revenue and annualize it. TTM (trailing twelve months) sums what recurring revenue actually was; it lags. Fast-moving companies quote MRR × 12; just say which you're using, and never mix them mid-story.
The discipline is the R: recurring. Implementation fees, one-off services, and non-recurring usage belong out of ARR — padding it with them is the classic way SaaS metrics rot. If your export has a segment or product column, ARR is one filter plus one multiplication, recomputed identically every month.
Formula
ARR = MRR × 12
MRR = the latest month's recurring revenue only. The TTM alternative (sum of the last 12 months) lags growth — pick one convention and label it.
The Sumwise question
Calculate ARR from the subscription segment: MRR for the latest month, ARR as MRR × 12, and the monthly MRR trend behind it.
Runs on monthly_revenue.csv. The monthly revenue sample again, filtered to its Subscription segment — Services and Other are real revenue but not recurring under contract, so they stay out of ARR.
Worked example — monthly_revenue.csv
| MRR, September (subscription segment) | $445,600 |
| ARR = MRR × 12 | $5,347,200 |
| Total September revenue (all segments) | $585,200 |
| Total-revenue run rate (trailing 3-mo avg × 12) | $6,899,200 — services & other stay out of ARR |
Subscription MRR is $445,600, so ARR is $5,347,200. The total-revenue run rate is $6,899,200 — the gap is non-recurring services and other revenue, which are real revenue but not ARR.
monthly_revenue.csv — drop it into the demo's Your-own-CSV tab (or Excel) and re-run the example.
Common questions
Why is MRR × 12 not just run rate?
Run rate annualizes whatever the window contains, recurring or not. ARR annualizes only contracted recurring revenue. Same multiplication, different numerator — which is why a company's ARR and revenue run rate are rarely equal.
Do multi-year contracts count at full value?
ARR counts the active annualized value — a 3-year, $300k/year contract adds $300k to ARR each year it's live, not $900k on day one. Total contract value (TCV) is the number that counts the whole deal.
ARR or ARR growth — which matters more?
Both, together: ARR is the size, its trend is the health. A $5.3M ARR shrinking 2% a month is worth less than a $2M ARR growing 10%. Track ARR net new (added − churned − downgraded) alongside the headline.
Compute arr on your own export, every month
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