Is ARR just MRR times twelve?

That is the standard convention, and it is a run rate rather than a forecast: it states what the next twelve months would bring if nothing changed. Nothing ever stays unchanged, so ARR quoted as though it were revenue earned is a projection wearing an accounting label.

How should annual contracts be counted in MRR?

Divide the contract value by twelve for MRR regardless of when it was billed. Recognising the whole amount in the month it was invoiced makes MRR spike and then collapse, which describes cash timing rather than the subscription base.

Businesssaas

MRR and ARR Calculator

MRR and ARR from a mix of monthly and annual contracts. Annual deals are normalised to a monthly rate rather than counted when they are billed.

Also called: monthly recurring revenue calculator, arr calculator.

MRR

$700,000.00

$700,000.00 of monthly recurring revenue, $8,400,000.00 annualised, across 120 customers, an ARPA of $5,833.33.

ARR

$8,400,000.00

Average revenue per account

$5,833.33

How this is calculated

Method and background

How this is calculated

Annual contracts divided by twelve and added to the monthly-billed revenue. Counting a year of revenue in the month it was invoiced is the single most common way MRR gets misstated, and it produces a chart with spikes that look like growth.

mrr = monthly + annual/12; arr = mrr * 12

M: Monthly-billed recurring revenue (currency)
A: Annual contract value (currency)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

mixed billing

Monthly-billed revenue per month: $400,000.00
Annual contract value billed yearly: $3,600,000.00
Customers: 120

MRR$700,000.00

arithmetic identity: 400k + 3.6M/12

Open this example

all annual

Monthly-billed revenue per month: $0.00
Annual contract value billed yearly: $1,200,000.00
Customers: 10

MRR$100,000.00

boundary

Open this example

no customers

Monthly-billed revenue per month: $100,000.00
Annual contract value billed yearly: $0.00
Customers: 0

MRR$100,000.00

degenerate case: guarded division

Open this example

Frequently asked questions

Is ARR just MRR times twelve?: That is the standard convention, and it is a run rate rather than a forecast: it states what the next twelve months would bring if nothing changed. Nothing ever stays unchanged, so ARR quoted as though it were revenue earned is a projection wearing an accounting label.
How should annual contracts be counted in MRR?: Divide the contract value by twelve for MRR regardless of when it was billed. Recognising the whole amount in the month it was invoiced makes MRR spike and then collapse, which describes cash timing rather than the subscription base.