ARR / MRR

Annual Recurring Revenue and Monthly Recurring Revenue are the defining metrics for subscription businesses — and the primary growth benchmarks for SaaS.

Definitions

MRR (Monthly Recurring Revenue): The predictable, recurring revenue your business generates in a given month from active subscriptions.

ARR (Annual Recurring Revenue): The annualized version of MRR. ARR = MRR × 12. It represents the run rate of your recurring revenue and is the primary growth metric for SaaS companies.

What Counts as Recurring Revenue

Only include revenue that repeats predictably each period: - Subscription fees (monthly or annual) - Retainer fees

Do NOT include: - One-time setup fees - Professional services - Non-recurring add-ons

Decomposing MRR

Understanding MRR change requires tracking five components:

| Component | Definition | |---|---| | New MRR | MRR from brand-new customers | | Expansion MRR | MRR added from existing customers (upsells, seat additions) | | Contraction MRR | MRR lost from downgrades | | Churned MRR | MRR lost from cancellations | | Reactivation MRR | MRR recovered from previously churned customers |

Net New MRR = New + Expansion + Reactivation − Contraction − Churned

ARR Milestones

• $10K MRR / $120K ARR: First meaningful signal for pre-seed
• $50K MRR / $600K ARR: Common seed stage benchmark
• $100K MRR / $1.2M ARR: Typical Series A minimum threshold
• $1M MRR / $12M ARR: Series B territory

MRR Growth Rate

A commonly referenced benchmark is the "T2D3" rule (triple, triple, double, double, double) for high-growth SaaS — but at early stages, month-over-month growth rate is more relevant.

A 10–15% MoM growth rate in early stage is generally considered strong.