# Annual Recurring Revenue (ARR)

> Annual recurring revenue (ARR) is the annualized value of recurring subscription revenue, calculated as MRR multiplied by 12.

- **URL**: https://dodopayments.com/glossary/annual-recurring-revenue-arr

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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.

## Learn More

- [SaaS metrics and KPI guide](https://dodopayments.com/blogs/saas-metrics-kpi)
- [How to build predictable recurring revenue](https://dodopayments.com/blogs/build-predictable-revenue)
- [Recurring revenue models and benchmarks](https://dodopayments.com/blogs/recurring-revenue)