Method and assumptions
ARR is a run-rate metric, not recognized annual revenue. It assumes the selected recurring run rate continues for twelve months.
ARR = current MRR × 12. Target MRR = current MRR × (1 + target ARR growth).
Worked scenario
Use the latest normalized MRR after removing one-time revenue and temporary credits. Annualize that run rate, then model a target ARR using a clearly defined growth period. Keep signed but not yet active contracts in a separate backlog line so the operating run rate is not confused with future contracted value.
How to interpret the result
ARR is a forward run-rate view, not GAAP or IFRS recognized revenue. It is useful for scale, planning and valuation comparisons only when the inclusion policy stays consistent. Compare current ARR, signed recurring value and recognized revenue separately; a large gap may reflect implementation timing, ramp contracts or non-recurring business.
Input reference
- Currency
- Example default: USD
- Current MRR
- Example default: 60000
- Target ARR growth
- Example default: 30%
- Signed annual recurring contracts
- Example default: 120000
- One-time revenue in period
- Example default: 15000
Common mistakes
- Treating ARR as revenue already earned during the year.
- Adding total contract value from multi-year agreements.
- Changing the treatment of usage and services between periods.
Before using the result
- Document what recurring charges qualify for ARR.
- Separate active run rate from contracted backlog.
- Bridge ARR to billing and recognized revenue each quarter.
Questions to check before deciding
Is ARR the same as annual revenue?
No. ARR annualizes a recurring run rate; recognized revenue follows accounting rules.
Should one-time revenue be included?
Keep it separate so the recurring run rate remains comparable.
Independent planning calculator. Not financial, tax, legal or investment advice.