Annual recurring Revenue (ARR) is a metric used mostly by subscription-based organizations, such as SaaS (Software as a Service) providers, to calculate predictable, recurring revenue received annually from clients. It represents the consistent income a company can expect from its active subscriptions or contracts.

How ARR is Calculated:

To calculate Annual Recurring Revenue (ARR), simply total up all the money your company gets from clients who pay on a regular, recurring basis, such as monthly or annually. This helps you understand how much predictable money your organization generates over the course of a year.

For example:

Suppose you have 100 consumers.

Each customer pays $1,000 a year (or annually).

To calculate the total ARR, multiply the number of customers (100) by the amount they pay annually ($1,000).

So, the calculation is: 100 clients x $1,000 = $100,000 ARR.

It means that based on these 100 consumers, the company may anticipate to generate $100,000 in subscription income in a year.

It's a simple way to assess the stability and growth of a firm that generates recurring revenue, like a subscription service.