Definition
The total annual value of all active subscription contracts. A key metric in SaaS that indicates business health and growth.
Formula
Monthly Recurring Revenue × 12 = ARRExamples
A SaaS with 100 customers at $100/month MRR has $120,000 ARR.
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Why ARR matters for affiliates
ARR is a quick read on a company's health and staying power. A business with strong, growing ARR has predictable income, which means it can keep funding its affiliate program and paying commissions on schedule.
It also hints at retention. High ARR usually reflects customers who renew, and renewing customers are exactly what keeps your recurring commissions alive. A shrinking ARR can be an early warning sign.
How ARR is calculated
The simplest version annualizes monthly recurring revenue:
- Monthly Recurring Revenue × 12 = ARR
- Example: 100 customers at $100/month MRR = $120,000 ARR.
ARR counts only recurring subscription revenue. One-time setup fees, services, or hardware are excluded, because they don't repeat predictably each year.
ARR vs MRR
They measure the same thing on different clocks. MRR is the monthly view; ARR is the annual view, roughly MRR multiplied by twelve.
Companies with mostly annual contracts tend to lead with ARR, while month-to-month products often track MRR. Either way, the trend matters more than the snapshot for judging program stability.
Frequently asked questions
How do you calculate ARR?
The fastest method is to multiply Monthly Recurring Revenue by 12. So $10,000 in MRR equals $120,000 ARR. For companies with annual plans, you can also sum the yearly value of all active subscription contracts. ARR includes only recurring revenue and excludes one-time fees like setup charges or professional services.
What is the difference between ARR and MRR?
ARR and MRR measure the same recurring revenue over different periods. MRR is the monthly figure, while ARR is the annualized figure, roughly MRR times twelve. Companies selling annual contracts usually report ARR, and month-to-month subscription businesses lean on MRR, but both track predictable subscription income.
Why does ARR matter when choosing an affiliate program?
ARR reflects a company's financial stability and growth. A business with strong, rising ARR has predictable revenue and is more likely to keep paying commissions reliably and investing in its partner program. Stagnant or falling ARR can signal trouble, which may eventually affect payouts or program longevity.