ARR vs MRR: The Difference, How to Calculate Each, and Which to Use
ARR vs MRR explained: what each metric counts, the formulas, worked examples with monthly and yearly plans, common mistakes, and when founders should report one or the other.
October 22, 2026 · 4 min read
MRR (monthly recurring revenue) and ARR (annual recurring revenue) measure the same thing, your recurring subscription revenue, on different time scales. ARR = MRR × 12. Early-stage and self-serve SaaS founders usually talk in MRR; companies with annual contracts usually talk in ARR. The bigger difference is in what you leave out, not which one you pick.
Key takeaways
MRR = the monthly value of all active subscriptions. ARR = MRR × 12.
Yearly plans count as one twelfth of their price in MRR.
Leave out one-off fees, services, lifetime deals and free trials from both.
MRR suits monthly plans and early stages; ARR suits annual contracts and B2B.
Neither is the same as revenue, which counts everything you were paid.
ARR vs MRR at a glance
MRR
ARR
Stands for
Monthly recurring revenue
Annual recurring revenue
Formula
Sum of monthly subscription values
MRR × 12 (or sum of annual contract values)
Time scale
One month
One year
Typical user
Early-stage, self-serve, monthly plans
B2B, enterprise, annual contracts
Best for
Spotting month-to-month changes and churn
Planning, valuation, comparing larger companies
Moves
Quickly, every month
Slowly, contract by contract
How to calculate MRR
MRR = sum of the monthly value of every active paid subscription
A monthly plan counts at its monthly price.
A yearly plan counts as its yearly price ÷ 12.
A discount counts at what the customer actually pays.
Our full guide to what MRR is covers new, expansion, contraction and churned MRR in more detail. Proud of your number? You can show it on your founders.page next to your product.
How to calculate ARR
ARR = MRR × 12
In the example, ARR = $103.92 × 12 = $1,247.04.
Companies selling mostly annual or multi-year contracts often calculate ARR directly instead: add up the annual value of every active contract. A three-year contract worth $36,000 adds $12,000 to ARR.
Both methods should land in the same place for the same customers. If they don't, something is being counted twice or left out.
When to use MRR and when to use ARR
Use MRR if:
most customers pay monthly
you're early and growth happens month by month
you want to see churn and upgrades quickly
you're an indie hacker or bootstrapped founder sharing numbers in public
Use ARR if:
most customers sign annual or multi-year contracts
you sell to businesses with sales-led deals
you're talking to investors about a company past early traction
monthly numbers jump around because big contracts renew in specific months
Many companies track both. Indie hackers and bootstrapped founders typically headline MRR ("$10k MRR"); venture-backed B2B companies headline ARR ("$5M ARR").
Common ARR and MRR mistakes
Counting a yearly payment as one month's MRR. A $1,200 annual plan is $100 MRR, not a $1,200 spike.
Including one-off revenue. Setup fees, services and lifetime deals inflate both numbers and hide churn.
Counting trials or free users. Only paying subscriptions count.
Ignoring cancellations scheduled for later. If a customer has cancelled but their plan runs to month end, many founders already remove it so the number doesn't flatter them.
Multiplying a lucky month by 12. ARR from MRR assumes subscriptions continue. If one month includes unusual usage charges, use a normal month.
Mixing methods. Switching how you calculate between months makes growth charts meaningless.
ARR vs MRR vs revenue
Metric
Counts
Example for one customer on a $1,200/year plan who also paid a $500 setup fee
MRR
Recurring, per month
$100
ARR
Recurring, per year
$1,200
Revenue (that year)
Everything received
$1,700
Revenue matters for accounting and tax. MRR and ARR matter for understanding whether the subscription business itself is growing.
Show off your MRR (the easy way)
Once you've calculated your MRR, put it to work. Founders who share real numbers earn trust faster: customers, collaborators and investors all pay attention to a founder with visible traction. That's why Pieter Levels and Marc Lou put revenue right on their personal sites.
founders.page is the easiest way to do the same. Add each product, type in its MRR and users, and your page shows them beside the product, labelled as self-reported. You can hide them any time. There's no dashboard to build and no code. It's free, and it takes five minutes.
Each product on founders.page can show its MRR and users, or neither.
MRR (monthly recurring revenue) is the recurring subscription revenue you expect in one month. ARR (annual recurring revenue) is the same thing over a year, usually calculated as MRR times 12. They measure the same revenue on different time scales.
How do you calculate ARR from MRR?+
Multiply MRR by 12. A business with $5,000 MRR has $60,000 ARR. This assumes your current subscriptions continue unchanged for a year.
How do you calculate MRR?+
Add up the monthly value of every active paid subscription. Monthly plans count at their monthly price, yearly plans count as the yearly price divided by 12, and one-off payments are left out.
Should a startup report ARR or MRR?+
Early-stage and self-serve SaaS businesses usually report MRR, because it moves visibly month to month. Businesses with mostly annual contracts, especially B2B and enterprise SaaS, usually report ARR. Pick one and calculate it consistently.
Is ARR the same as annual revenue?+
No. Annual revenue includes everything you earned in a year, including one-off fees and services. ARR only counts recurring subscription revenue, annualised from today's subscriptions.
Do annual plans count toward MRR?+
Yes, at one twelfth of their price. A $1,200 yearly plan adds $100 to MRR, not $1,200 in the month it was paid.
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