Management → business-foundations
ARR
Annualized recurring revenue from active subscriptions or contracts, commonly used to measure recurring business scale.
ARR
ARR—Annual Recurring Revenue—is the annualized value of recurring subscription or contract revenue currently in force.
Why it matters
ARR helps subscription businesses describe recurring scale and compare growth over time. It is widely used in SaaS planning, valuation, and operating reviews.
Mental model
ARR converts recurring revenue into an annual run rate. It normally excludes one-time services, implementation fees, and other non-recurring income.
Common mistakes
- Treating signed but not active contracts as current ARR without disclosure.
- Including one-time revenue.
- Ignoring churn, contraction, and collection risk.
- Assuming ARR is identical to recognized annual revenue.