Glossary
What is annual recurring revenue (ARR)?
Annual recurring revenue, or ARR, is the yearly value of a company's recurring subscription contracts at a point in time. It counts revenue that repeats, such as subscriptions, and leaves out one time fees such as setup or services. It is the headline growth number for most subscription businesses.
Published by Sellinger AI. Numbers and settings checked on 24 October 2026 against the fact register. Report an error.
How do you calculate ARR?
ARR = the annualised value of all active recurring contracts. An example with made up numbers: 40 customers on 1,000 a year and 10 customers paying 300 a month (3,600 a year) give ARR of 40,000 + 36,000 = 76,000. Monthly subscribers are annualised by multiplying their monthly fee by 12.
What should you leave out?
- One time setup or implementation fees.
- Professional services and consulting.
- Usage charges that are not committed, unless you report them separately.
- Contracts that have been cancelled, even if they are still running out their term.
How does ARR relate to MRR?
ARR is MRR times 12 for a business that bills monthly. Companies with annual contracts usually report ARR; companies with mostly monthly plans often report monthly recurring revenue. The growth of either over time, net of churn, matters more than the level.
How Sellinger handles it
Sellinger does not calculate ARR. For reference, Sellinger's own plans are monthly: cancel, upgrade or change modules at any time. There are no lock in contracts and no setup fees on self serve plans.
Common questions
Is ARR the same as revenue?
Should setup fees count in ARR?
What is net new ARR?
Sources and method
General subscription finance practice; the example is illustrative. Sellinger terms from the fact register.
Related: Monthly recurring revenue, Net revenue retention, Churn rate, Customer lifetime value.
