ARR vs MRR × 12 — same number, different signal
ARR is just monthly recurring revenue × 12, but it standardizes the language with investors and reflects the contracted, recurring portion only. Don't include one-time setup fees, professional services, or non-recurring usage. Those go in 'total revenue,' not ARR.
Why NRR matters more than new sales
A 100% NRR business has to replace 100% of revenue every year just to stay flat. A 120% NRR business grows 20% per year with zero new logos. That's why investors care about expansion revenue almost more than top-of-funnel.
- • Expansion engines: seat growth, usage upsells, plan upgrades.
- • NRR > 110% = healthy. > 120% = top quartile. > 130% = elite.
- • Contraction (downgrades) and churn both hurt NRR equally.
Rule of 40, in one sentence
Investors will fund either fast growth OR profitability — but the combined score (growth % + EBITDA margin %) needs to be 40 or higher. A 60% grower at −20% margin scores 40. A 15% grower at 25% margin also scores 40. Both are fundable. Below 40, valuations compress fast.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
How to Calculate ARR (2026): Real SaaS Math, NRR, GRR, and the Rule of 40
The exact formula investors use for ARR, why NRR matters more than new sales, and how to score yourself against the Rule of 40 — with worked examples.
Read the guideRevenue Model Glossary: 40 Terms Every Operator Should Know (CPM, RPM, ARPU, LTV, CAC, ROAS…)
Plain-English definitions for the 40 revenue-modeling terms that show up across creator, SaaS, ecommerce, and ads — with the exact formula, a worked example, and the most common misuse for each.
Read the guideYouTube CTR and Watch Time: The Two Metrics That Decide Your Revenue
Why a 2% CTR lift can double a channel's revenue, what 'good' watch time looks like by video length, and the exact relationship between AVD, session time, and your RPM.
Read the guideFAQ
How do I calculate ARR?
ARR = ending MRR × 12. Use only contracted, recurring subscription revenue — exclude one-time setup, professional services, and ad-hoc usage charges.
What's the difference between NRR and GRR?
Gross Revenue Retention (GRR) measures retention of existing revenue without expansion (it can't exceed 100%). Net Revenue Retention (NRR) includes expansion and can exceed 100% — the gold-standard SaaS health metric.
What's a good Rule of 40 score?
40 or above is the VC bar. Top-quartile public SaaS hits 50–60. The number rewards either fast growth or strong margin, so both strategies work.
Should I count annual contracts at full value?
Yes — ARR normalizes to annual, so a $1,200 annual contract counts the same as 12× $100 monthly. But booking the cash differently affects deferred revenue and cash flow, not ARR.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.