ARR Calculator
Annual Recurring Revenue (ARR) is the normalized annual value of all active subscription contracts. It is the primary scale metric for SaaS and subscription businesses and is used for annual planning, valuation, and investor reporting. ARR is simply MRR multiplied by 12, assuming a steady run rate. This calculator converts between MRR and ARR in both directions and also shows the revenue growth required to reach a target ARR from your current run rate.
ARR formula
ARR = MRR * 12 MRR for Target = Target ARR / 12
ARR represents a run-rate estimate, not guaranteed future revenue. It assumes current MRR is constant for 12 months. Actual ARR at year-end will differ based on new bookings, churn, and expansions throughout the year.
ARR growth targets and T2D3
- The T2D3 framework suggests best-in-class SaaS companies triple ARR for two years, then double it for three years after reaching $2M ARR.
- At $1M ARR, a company is considered to have found initial product-market fit. At $10M ARR, it has repeatable go-to-market. At $100M ARR, it is enterprise-scale.
- ARR per employee is a common efficiency metric: world-class SaaS companies target $200,000 to $400,000 ARR per employee.
- ARR growth rate compounds quickly: 100% YoY growth for 3 years turns $1M ARR into $8M ARR.
ARR: frequently asked questions
What is annual recurring revenue (ARR)?
ARR is the annualized value of all active subscription and recurring contracts. It is calculated as MRR multiplied by 12. ARR is the headline metric for SaaS businesses and is used to measure company scale, set targets, and determine revenue multiples for valuation.
What is the difference between ARR and MRR?
MRR (Monthly Recurring Revenue) is the recurring revenue in a single month. ARR is MRR multiplied by 12. ARR is used for annual planning and investor reporting. MRR is used for month-to-month operational tracking. Both measure the same underlying recurring revenue at different time horizons.
Should ARR include one-time fees?
No. ARR should include only recurring subscription and contract revenue. One-time setup fees, professional services, and variable usage fees that are not contractually committed should be excluded. Including non-recurring items inflates ARR and misleads investors and operators.
How is ARR used in SaaS valuation?
SaaS companies are often valued as a multiple of ARR (e.g., 5x ARR, 10x ARR). The multiple depends on growth rate, gross margin, GRR, and market size. High-growth companies (above 50% YoY ARR growth) with strong retention typically command the highest multiples.
What is the difference between ARR and ACV?
ARR is the total annualized recurring revenue across all customers. ACV (Annual Contract Value) is the average annual value of a single customer contract. ARR = Number of Customers * ACV when all contracts are identical; in practice, ACV varies and ARR is the aggregate.
Official sources
- U.S. Census Bureau, E-Stats: census.gov/programs-surveys/e-stats.
- Federal Trade Commission, Business Guidance: ftc.gov/business-guidance.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.