Key Metrics

MRR/ARR (Monthly/Annual Recurring Revenue)

Predictable revenue from subscriptions, measured monthly (MRR) or annually (ARR), the key metric for subscription businesses.

What is MRR/ARR?

MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) measure predictable subscription revenue.

ARR = MRR × 12

MRR Components

  • New MRR: From new customers
  • Expansion MRR: Upgrades and add-ons
  • Contraction MRR: Downgrades
  • Churned MRR: Cancellations

Net New MRR = New + Expansion - Contraction - Churned

Why It Matters

  • Primary valuation metric for SaaS
  • Shows business trajectory
  • Enables revenue forecasting
  • Indicates product-market fit

ARR Milestones

  • $1M ARR: Meaningful traction
  • $5M ARR: Series A-ready
  • $10M ARR: Strong product-market fit
  • $100M ARR: Public-company territory

Growth Benchmarks

  • Good: 20-50% YoY
  • Great: 50-100% YoY
  • Exceptional: 100%+ YoY (triple-triple-double-double)

Related Terms

SaaS (Software as a Service) Churn Rate Unit Economics

Relevant AI Agents

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