ARR (Annual Recurring Revenue) is the total predictable subscription revenue a business earns in a year, normalized to an annual figure. It's the annualized view of MRR — the headline growth number for subscription businesses, especially those on annual contracts. ARR counts only recurring revenue and excludes one-time fees like setup or professional services.
How to calculate ARR.
ARR = MRR × 12 or, for annual-contract businesses, the sum of the annualized recurring value of all active subscriptions.
Like MRR, ARR moves through the same five components over a year:
New + Expansion + Reactivation
− Contraction − Churned
- New ARRFrom newly acquired customers
- Expansion ARRUpgrades and seat growth from existing customers
- Reactivation ARRPreviously churned customers returning
- Contraction ARRDowngrades (reduces ARR)
- Churned ARRCancellations (reduces ARR)
Keep it clean: include only recurring charges. Rolling one-time implementation fees or variable usage overages into ARR overstates the number and breaks comparability with other SaaS businesses.
ARR example.
A business running $50,000 MRR:
- Base ARR ($50,000 MRR × 12)
- $600,000
- + New ARR (added this year)
- +$180,000
- − Churned ARR
- −$48,000
- + Expansion ARR
- +$60,000
- Net new ARR
- +$192,000
- Ending ARR
- $792,000
Why ARR matters for attribution.
ARR is the number leadership and investors track — but you can't attribute a headline figure directly. Attribution happens at the revenue-event level (the MRR movements that roll up into ARR), so the two work together: you attribute each new and expansion event to the channel that earned it, then roll those into the ARR you report.
This matters most for annual-plan and enterprise SaaS, where a single paid conversion is a large annual commitment that lands in Stripe well after the click. Signal Sparrow syncs that revenue from Stripe and attributes it to the originating campaign — so your ARR growth ties back to the marketing that drove it, reconciled to the cent.
