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ARR (Annual Recurring Revenue) and MRR (Monthly Recurring Revenue) represent the same underlying metric at different time scales. The relationship is simple:
ARR = MRR × 12 MRR = ARR ÷ 12
But founders mix up these numbers constantly — especially when dealing with annual-plan customers, investor conversations, or financial models that use both figures.
When to use ARR vs MRR
Use MRR when: - Tracking month-to-month growth velocity - Computing churn impact (churn is a monthly rate) - Calculating burn rate vs revenue - Running short-term models (< 1 year)
Use ARR when: - Talking to investors (most SaaS valuations use ARR multiples) - Comparing to industry benchmarks ($1M ARR, $10M ARR milestones) - Reporting to your board - Calculating revenue multiples (ARR / ARR multiple = company value)
Annual plan revenue recognition
A customer who pays $1,200 upfront for a year contributes $100/month to MRR and $1,200 to ARR — but the cash arrives all at once. This distinction matters for runway calculations: ARR and cash flow are not the same thing.
Frequently asked questions
Is ARR the same as annual revenue? No. ARR includes only recurring subscription revenue. One-time setup fees, professional services, and non-recurring revenue are excluded from ARR. This is what makes ARR a useful measure of predictable, recurring business health.
What ARR multiple should I use for valuation? SaaS valuations typically range from 5–15× ARR depending on growth rate, net retention, and market conditions. At $1M ARR growing 100%+ YoY, 10–15× is common. At $5M ARR growing 50% YoY, expect 6–10×.