The confusion between run rate and ARR is common — especially for SaaS companies in early stages where the distinction matters most.
ARR: Annual Recurring Revenue
ARR = Current MRR × 12
ARR is based on contracted, recurring subscription revenue. It represents the forward-looking annual value of your current subscription base — only counting revenue you have under contract.
ARR excludes: - One-time setup fees - Professional services - Non-recurring revenue - Expired contracts
Run Rate: Annualized Actual Revenue
Run Rate = (Period Revenue / Months) × 12
Run rate annualizes whatever revenue actually came in — recurring, one-time, or otherwise. It's a simpler, more general calculation.
Which to use?
| Scenario | Use |
|---|---|
| Pure SaaS subscription reporting | ARR |
| Non-subscription business | Run Rate |
| Mixed model (subscriptions + services) | Both, separately |
| Investor pitch deck | ARR (more rigorous) |
For pure SaaS: always lead with ARR. Use run rate as secondary context.
Calculate run rate at the Revenue Run Rate Calculator and ARR at the ARR Calculator.