What is ARR vs MRR?
Nexa Consultancy | Startup & Finance Glossary
Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR) are the lifeblood metrics of a SaaS business. MRR is the predictable revenue a company expects to receive in a given month, while ARR is the annualized version.
For Startups: Early-stage startups typically focus on MRR as it provides a more granular, month-over-month view of growth and momentum. As the business scales and contract values increase, ARR becomes the more common metric for discussing scale with investors.
For SaaS: These metrics must only include committed recurring revenue. One-time setup fees or professional services should be excluded to maintain the integrity of the metric.
Calculation: ARR = MRR * 12
Example: A SaaS company with an MRR of ₹50 Lakhs has an ARR of ₹6 Crore.