ARR and MRR are two views of the same recurring revenue stream. Knowing when to use each prevents confusion in investor updates and internal planning.
The core difference
MRR = Monthly Recurring Revenue. One month of recurring revenue. ARR = Annual Recurring Revenue. One year of recurring revenue.
For pure monthly billing: ARR = MRR × 12. Simple.
The difference matters when you have annual contracts. A $12,000/year contract contributes: - $1,000/month to MRR - $12,000 to ARR
If you only measure ARR, you may not notice that new monthly subscriptions are trending up or down. MRR catches intra-year trends that ARR smooths over.
When to use MRR
Operational tracking: MRR changes monthly. Track MRR to see expansion, contraction, and churn in real time. Use MRR for NRR calculations.
Short-term forecasting: MRR growth rate × 12 gives ARR trajectory. Watching MRR helps you catch inflections before they show up in ARR.
Cash flow planning: Monthly subscription cash in is MRR-based. Annual subscribers pay upfront, but you recognize it monthly.
When to use ARR
Investor reporting: Investors speak ARR. All benchmarks, multiples, and fundraising conversations use ARR as the common unit.
Valuation: SaaS companies are typically valued at ARR multiples (e.g., 8–15× ARR for growth-stage). MRR multiples are just ARR multiples ÷ 12.
Annual planning: ARR targets are cleaner for annual operating plans. "Reach $5M ARR by December" is more meaningful than "reach $417k MRR."
Calculate your ARR from MRR instantly with the free ARR Calculator.