MRR vs ARR: Formulas, Examples, and When to Use Each
MRR and ARR describe the same recurring revenue at different time scales. Use MRR for monthly movement and ARR for annual scale.
MRR is normalized monthly recurring revenue. ARR is normalized annual recurring revenue. For a stable subscription base, ARR = MRR × 12 and MRR = ARR ÷ 12. They describe the same recurring revenue at different time scales.
Example
$10,000 MRR × 12 = $120,000 ARR. Neither figure includes one-time setup fees.
MRR vs ARR at a glance
MRR formula
MRR = monthly recurring subscriptions + annual recurring subscriptions ÷ 12 + quarterly recurring subscriptions ÷ 3 - ongoing monthly discounts.
Use the recurring amount the customer actually pays. Keep setup, migration, consulting, hardware, and other one-time charges out of MRR.
Calculate MRR from mixed billing cycles, or read the full MRR formula guide.
ARR formula
ARR = MRR × 12. If you start with annual contracts, normalize the recurring contract value using consistent inclusion rules before adding it. Do not annualize a one-time revenue spike.
The conversion is easy. Consistent definitions are the hard part.
Worked example with mixed plans
- $3,000 in monthly subscriptions contributes $3,000 MRR.
- $24,000 in annual recurring contracts contributes $2,000 MRR.
- $300 in ongoing monthly discounts reduces MRR by $300.
- Total MRR is $4,700. ARR is $56,400.
When to use MRR
Use MRR when
- You review new, expansion, contraction, and churned revenue each month.
- You need to connect product or acquisition changes to a recent revenue movement.
- Monthly plans are common and the monthly operating cadence matters.
- You want a sensitive signal for whether growth is compounding or replacing losses.
When to use ARR
Use ARR when
- You communicate the annual scale of a recurring-revenue business.
- Annual contracts dominate and annual planning is the natural frame.
- You compare the subscription base with annual goals or budgets.
- You make clear that ARR is annualized recurring value, not recognized GAAP revenue.
MRR, ARR, ACV, and revenue are not interchangeable
Annual contract value (ACV) describes the annual value of a contract. ARR describes the annualized recurring base across the business. Revenue is an accounting measure that can include non-recurring items and timing rules. A cash payment for an annual plan is not twelve months of MRR in the payment month.
What to inspect after MRR or ARR changes
A total does not reveal the cause. Split the movement into new MRR, expansion, contraction, churned MRR, and failed payments. Then connect it to acquisition and conversion changes.
Calculate first. Diagnose the movement second.
Calculate MRR · Check MRR movement · Diagnose a Stripe revenue change
Frequently asked questions
What is the difference between MRR and ARR?
MRR is normalized monthly recurring revenue. ARR is the annualized version of the same recurring subscription base and usually equals MRR multiplied by 12.
How do you convert MRR to ARR?
Multiply MRR by 12. For example, $10,000 MRR equals $120,000 ARR.
Is ARR the same as annual contract value?
Not always. ARR normalizes recurring revenue across the business. Annual contract value describes one contract and may include items that do not belong in ARR.
Should a SaaS founder track MRR or ARR?
Track both, but use MRR to inspect monthly movement and ARR to communicate annual scale. Apply the same inclusion rules to both.