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How to Calculate Annual Recurring Revenue

What is Annual Recurring Revenue?

Calculates total predictable annual revenue from subscriptions. Indicates business health and valuation potential for SaaS companies.

Step-by-Step Guide

  1. 1Calculate total MRR
  2. 2Multiply MRR by 12 for annualized revenue
  3. 3Account for expected churn and new subscriptions
  4. 4Compare to growth targets

Worked Examples

Input
$5000MRR
Result
$60000ARR

Common Mistakes to Avoid

  • Counting annual payment as single-year revenue instead of spreading
  • Not adjusting for expected churn in projections

Frequently Asked Questions

Is ARR the same as annual revenue?

No; ARR counts only recurring subscription revenue at current run rate, excluding one-time sales.

How do I grow ARR?

Acquire new customers, reduce churn, and increase ARPU (average revenue per user) through upsells.

Ready to calculate? Try the free Annual Recurring Revenue Calculator

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