MRR vs ARR vs Revenue
Monthly recurring revenue (MRR) is recurring revenue normalized to one month. Annual recurring revenue (ARR) is commonly MRR multiplied by 12. Total revenue includes recurring revenue plus one-time sales and other recognized revenue.
MRR and ARR are operating metrics for recurring businesses; revenue is an accounting measure governed by recognition rules. Do not substitute one for the other in financial statements.
Example
A subscription business with 300,000 ARR before considering churn, expansion, contraction, or changes in the customer base. If it also sells $8,000 of one-time services in a month, total revenue for that month is not simply the same as MRR.
Questions
Does ARR equal annual revenue?
Not necessarily. ARR is a run-rate metric, while annual revenue reflects what was actually recognized during the year.
What changes MRR?
New subscriptions and expansion increase MRR; contraction and churn reduce it. One-time invoices should not be included unless they are genuinely recurring.
Which metric should I use?
Use MRR or ARR for recurring-revenue planning and revenue for accounting and reporting. Define the metric consistently across the business.
Limitations
This article is explanatory and its route currently has an empty calculator function. Verify revenue recognition and reporting policy with an accountant.