Enter your Monthly Recurring Revenue (MRR) to instantly see Annual Recurring Revenue (ARR) and projected revenue over time.
Starting MRR of 42,000, projected 12 months at 6 percent monthly growth and 2 percent monthly churn.
ARR 504,000 today, MRR around 66,318 in a year, roughly 649,909 of revenue across the period.
Six percent growth against two percent churn is not four percent net — it is 1.06 × 0.98 = 1.0388, or 3.88 percent. The gap is small in one month and compounds over a year: 4 percent monthly for twelve months would reach 67,243 rather than 66,318. Any planning model that nets the two by subtraction drifts upward, and the error grows with both the horizon and the rates.
It averages the starting and ending MRR and multiplies by the months, which is the area of a trapezoid. It is close but not exact: the true sum of the twelve monthly figures for the example is about 651,075, so the approximation runs a little under 0.2 percent low here. It is a reasonable planning estimate and not an accounting figure; for anything that has to reconcile, sum the actual monthly values.
Multiplying current MRR by twelve describes what the next year would produce if nothing changed. For a growing company it understates the year ahead, and for a shrinking one it overstates it. Reporting ARR as though it were revenue earned is a common and consequential confusion, particularly when the two get compared against a profit-and-loss statement that measures something entirely different.
Setup fees, professional services, hardware and annual prepayments that are not recognised monthly all distort the figure if they are folded in, and they distort the projection more than the snapshot because the growth rate then compounds a number that was never recurring. Normalise annual contracts by dividing by twelve, and leave genuinely non-recurring revenue out entirely.
MRR is normalised monthly recurring revenue; ARR is that figure multiplied by twelve. ARR is a run rate — what a year would look like at today’s level — rather than revenue actually earned over the last twelve months.
Multiply the factors rather than subtracting the rates: (1 + growth) × (1 − churn). At 6 percent growth and 2 percent churn the net factor is 1.0388, not 1.04, and the difference compounds across a projection.
Yes, normalised — divide the annual value by twelve. Booking the whole amount in the month it is paid creates a spike that makes both the trend and any growth-rate calculation meaningless.
It is a planning approximation. The calculation averages the start and end MRR and multiplies by the months, which assumes a straight line where the real path compounds. For a shrinking business it always runs high. For a growing one it usually runs slightly low — about 0.2 percent low in the example above — but that reverses at faster growth or longer horizons: beyond about 4.3 percent net monthly over twelve months, or about 1 percent over twenty-four, it starts running high instead. For exact totals, add the monthly figures individually.
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