What is the difference between total revenue and ARR?

The total dollar amount coming into a business is revenue, while a company’s ARR is the amount of revenue generated by annual subscriptions. While revenue is a GAAP accounting metric, ARR has to be modeled out according to a revenue recognition schedule to meet GAAP requirements. ARR is an important metric to evaluate the health of your business based on the predictable revenue of long-term subscriptions.

What is the difference between ARR and MRR?

Although ARR and MRR both describe recurring subscription revenue, annual revenue from subscriptions is the better metric to evaluate your company’s big-picture growth goals and sustainability. MRR, on the other hand, can better describe the short-term impact on revenue by marketing campaigns or efforts to increase operational efficiency.

What is the difference between ARR and annual profit?

Annual profit refers to the total amount of profit generated over the course of a year, while ARR refers to the amount of revenue generated from subscription contracts over the course of a year. The difference between the two is that annual profit is a profit-based metric while ARR is revenue-based (see our article on how revenue is different from profit for more), and ARR solely includes income generated from subscription contracts, while annual profit includes all company income.

What is a good ARR growth rate?

A “good” ARR growth rate will vary significantly based on a company’s growth stage and current ARR. Earlier-stage companies are expected to have a higher ARR growth rate than later-stage companies. According to a Capchase analysis of 439 SaaS companies between 2020 and 2021, a company with less than $15 million in revenue needs 100 percent + YoY ARR growth to be in the top quartile of companies globally. Median ARR growth for companies of that size was 40-60 percent.

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