ARR vs MRR: Key Differences
Learn the differences between Annual Recurring Revenue and Monthly Recurring Revenue.
What is MRR?
MRR (Monthly Recurring Revenue) is the total predictable revenue your business expects each month from active subscriptions, normalized to a monthly amount. It’s the core operational metric for tracking growth, churn, and expansion month to month.
What is ARR?
ARR (Annual Recurring Revenue) is the yearly equivalent: ARR = MRR × 12. It’s commonly used for annual planning, investor reporting, and valuation (e.g. “we’re at $1.2M ARR”). Some companies use ARR only for annual contracts; for consistency, many define ARR as 12× MRR regardless of billing frequency.
When to Use Which
Use MRR for day-to-day operations: tracking new/expansion/churn, running cohorts, and reviewing trends. Use ARR for board decks, fundraising, and high-level targets. Both should be calculated from the same underlying subscription data so they stay in sync.
Summary
MRR = monthly view of recurring revenue. ARR = annual view (MRR × 12). Track MRR for execution; report ARR for strategy and investors.