ARR (Annual Recurring Revenue) and MRR (Monthly Recurring Revenue) are not competing metrics — they measure the same thing at different time scales. ARR = MRR × 12. But which one you report publicly, and how you define it internally, has real implications for how your business is perceived and managed.
When to use MRR
MRR is your operational metric. You use it for: - Monthly reporting to the team and board - Cohort analysis (tracking customer cohorts over time) - Growth rate calculations (MoM growth is more granular than YoY) - Churn tracking (monthly churn rate is directly comparable to MRR loss)
MRR gives you faster feedback loops. A product change that improves trial conversion shows up in MRR within 30 days.
When to use ARR
ARR is your investor and external metric. You use it for: - Fundraising — VCs benchmark you against ARR milestones ($1M, $3M, $10M ARR) - Valuations — SaaS companies are valued at ARR multiples (5–15× ARR for high growth) - Hiring — senior sales and marketing leaders use ARR to gauge company scale - Public comparisons — public SaaS metrics are almost always quoted in ARR
The normalization problem
ARR normalizes annual and monthly contracts to an apples-to-apples comparison. A customer paying $12,000/year annually and a customer paying $1,000/month are worth the same ARR. Without normalization, you'd undercount annual customers in any given month.
Most SaaS teams track MRR as their primary metric and derive ARR for external communication.
What counts in ARR?
Only committed, recurring revenue counts: - Monthly subscriptions ✓ - Annual contracts (normalized to monthly) ✓ - Professional services ✗ (one-time, not recurring) - Usage-based revenue (variable, so only committed base) ✗ or ½-credit
Use the ARR Growth Rate Calculator to track your YoY ARR growth rate and project your ARR trajectory over 3 and 5 years.