ARR Calculator
Build annual recurring revenue from its movements, understand why it is a run rate rather than revenue earned, and see what annualising a single strong month does to the number.
ARR Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- A point-in-time run rate that says nothing about the timing of cash.
- Excludes non-recurring revenue, which may be material to the actual business.
- Assumes contracted revenue persists, which month-to-month subscriptions do not guarantee.
In short: Opening ARR of $4,612,800 plus $1,600,000 of new and $620,120 of expansion, less $130,000 of contraction and $245,000 of churn, closes at $6,457,920 — growth of exactly 40.00%, with net revenue retention of 105.31%.
Formula
ARR is a run rate, not revenue. It states what a year would produce if the current contract base persisted unchanged for twelve months.
Worked Example
- Start with the opening run rate. $4,612,800 of ARR under contract at the start of the year — the same base as $384,400 of MRR multiplied by twelve.
- Add what was won. $1,600,000 of new ARR and $620,120 of expansion from existing customers is $2,220,120 of gross additions.
- Subtract what was lost. $245,000 of churn and $130,000 of contraction is $375,000, giving net new ARR of $1,845,120.
- Read the growth. Closing ARR of $6,457,920 is exactly 40.00% growth, with net revenue retention of 105.31% and gross retention of 91.87%.
- Test the annualisation trap. Compounding the best month's 9.91% for a year would imply $14,335,443.04 — more than double what actually happened.
The annualisation trap is the reason this page exists. A business having a strong month is tempted to annualise it, and the arithmetic is seductive: 9.91% compounded twelve times implies ARR of $14,335,443.04 against the $6,457,920 actually achieved — an overstatement of 121.98%. Growth rates fall as the base grows, because the same dollar of net new revenue is a smaller percentage of a larger number, and no sales organisation scales its output in step with a compounding denominator. This is the single most common piece of arithmetic challenged in diligence, and the correction usually arrives late, after a valuation has been anchored to the inflated figure.
Strengths & Limits Of This Model
Where this engine is strong
- Enforces the run-rate versus earned-revenue distinction explicitly.
- Quantifies the annualisation trap against the user's own best month.
- Cross-checks growth against net and gross retention from the same inputs.
Where it stops
- Cannot distinguish committed from cancellable recurring revenue.
- A single-period bridge does not show the trend acquirers examine.
Practical Use Cases
Reporting run rate to investors without overstating it
Use the closing contracted base, not an annualised best month. State the growth rate on the opening base so the denominator is visible.
Reconciling ARR to reported revenue
ARR always exceeds GAAP revenue in a growing business, because the closing base was not in place all year. Expect and explain the gap.
Benchmarking capital efficiency
ARR per employee is the standard measure. Pair with sales efficiency from the SaaS Magic Number Calculator.
Assessing whether growth is durable
Growth carried by expansion is more durable than growth carried by new logos. Decompose it with the Retention Rate Calculator.
Methodology & Editorial Standards
Annual recurring revenue is the annualised value of contracted subscription revenue at a point in time, and the engine builds it from the same movement components as monthly recurring revenue so the two reconcile exactly. The critical distinction the engine enforces is that ARR is a run rate rather than earned revenue: it states what twelve months would produce if the current contract base persisted unchanged, whereas GAAP revenue reports what was actually delivered in a period. In any growing business ARR materially exceeds reported revenue, because the closing base was not in place for the full year, and conflating the two overstates the business to lenders, acquirers and auditors. Net and gross revenue retention are computed as cross-checks on the same movements, since they use identical inputs and provide an immediate test of whether growth is carried by the existing base or by new acquisition. The engine also models the annualisation trap explicitly, comparing actual closing ARR against the figure implied by compounding a single strong month, because growth rates necessarily decline as the base grows and run rates built on peak months are the most frequently challenged numbers in diligence. The engine implements the standard published formula for this calculation. Inputs are validated for domain and sign before evaluation, and any undefined case returns an em-dash rather than a spurious value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
ARR Calculator — 20 Expert FAQs
20 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What is ARR?
Annual recurring revenue — the annualised value of contracted subscription revenue. Here it closes at $6,457,920.
Is ARR the same as revenue?
No. ARR is a forward run rate assuming today's contracts persist twelve months; revenue is what was actually earned. Growing businesses always show ARR above revenue.
How is ARR calculated from MRR?
Multiply MRR by twelve. Here $384,400 of opening MRR is $4,612,800 of opening ARR.
What is net new ARR?
New plus expansion less contraction and churn — $1,845,120 here, which is 40.00% growth on the opening base.
Why can I not annualise my best month?
Because growth rates fall as the base grows. Compounding 9.91% here implies $14,335,443.04 against $6,457,920 actually achieved.
What ARR growth rate is expected?
Around 30% is a common expectation for a scaling business, though it varies sharply with stage and size. This business grew 40.00%.
What is a good ARR per employee?
Early-stage businesses often run below $100,000; efficient scaled software businesses reach $150,000 to $250,000. Here it is $143,509.33.
Should professional services be in ARR?
No. Only recurring contracted subscription revenue belongs in ARR. Services are non-recurring and inflate the run rate.
How do multi-year contracts affect ARR?
Include only the annualised value, not the total contract value. A three-year $300,000 deal contributes $100,000 of ARR.
What is the difference between ARR and bookings?
Bookings are contracts signed in a period, including non-recurring items. ARR is the recurring run rate in force at a point in time.
Why does my ARR exceed my revenue?
Because ARR reflects the closing base annualised, while revenue reflects what was earned as the base grew through the year. The gap is normal.
What retention supports durable ARR growth?
Net retention above 100% means the base grows without new sales. Here 105.31% net and 91.87% gross retention.
Does ARR include usage-based revenue?
Only the committed recurring portion. Variable overage is not contractually recurring and should be excluded or disclosed separately.
How do acquirers verify ARR?
By reconciling the contract base to invoices and cash. Aggressive definitions of ARR are the most common diligence adjustment.
What is committed ARR?
A stricter measure counting only contractually committed revenue, excluding month-to-month subscriptions that can be cancelled at will.
Should churned revenue be netted against new?
Not in reporting. Show both gross figures, because netting hides whether growth comes from winning more or losing less.
Is this arr calculator free to use?
Yes. It is free, requires no account, and has no usage limits. ApexConverter is funded by contextual advertising, never by selling user data.
Is my data sent to a server?
No. The engine runs as Vanilla JavaScript inside your browser under our Zero-Server Client-Side Execution model. Your figures are computed locally and are never transmitted, logged, or stored.
How accurate is this calculator?
It applies the standard closed-form formula in IEEE-754 double precision, rounding only at the display layer. The engine is reconciled against an independent reference implementation before release.
Does it work on mobile?
Yes. The interface is mobile-first with numeric keypad hints and is tested down to a 320-pixel viewport with no horizontal scrolling.