MRR vs ARR — what's the difference?
MRR and ARR measure the same recurring revenue stream — one in months, one annualized. Picking the wrong one for your stage either underwhelms investors or overstates the business.
MRR (Monthly Recurring Revenue)
Total recurring revenue billed in a single month, normalized for plan length.
When to use: Early-stage SaaS (under ~$1M ARR), MoM growth tracking, weekly internal dashboards.
ARR (Annual Recurring Revenue)
Annualized recurring revenue — usually MRR × 12, or sum of annual contract values.
When to use: Reporting to investors, comparing across companies, sizing market opportunity above $1M.
Bottom line
Use MRR while you're growing month over month and ARR once you're optimizing year over year. Annualizing $30k MRR into '$360k ARR' on month 2 is statistically dishonest — wait until growth has stabilized.
Frequently asked
Does ARR include one-time fees?
No. ARR is recurring only — implementation fees, hardware, and one-off services are reported separately as 'Total Revenue'.
If I sell annual prepay, do I count the full $12k as MRR?
No — divide by 12. The cash hits in month 1 but MRR normalizes to the monthly equivalent so growth comparisons stay clean.