Last updated: 2026-06-23

MRR and ARR

Monthly recurring revenue (MRR) and annual recurring revenue (ARR) are the two standard ways subscription businesses size their recurring revenue. They measure the same thing — predictable subscription revenue — over different time windows. MRR states it per month; ARR states it per year. The two are linked by a single fixed factor of twelve.

Because the relationship is exact, converting between them is straightforward arithmetic. The value of stating the figure both ways is reporting clarity: monthly-billed businesses think in MRR, while businesses built on annual contracts think in ARR.

The conversion

ARR is twelve times MRR:

And MRR is ARR divided by twelve:

There is no compounding and no interest involved — recurring revenue is assumed to repeat each month at the same run rate, so a year is simply twelve identical months. This is why ARR is described as a run rate rather than as revenue earned over the trailing twelve months.

Worked example

Suppose a business has 50,000 in monthly recurring revenue. Annualizing it multiplies by twelve:

So 50,000 MRR corresponds to 600,000 ARR. Reversing the calculation, a business reporting 600,000 ARR has:

The two figures describe the identical revenue stream at two different scales.

What belongs in recurring revenue

Both MRR and ARR count only predictable, recurring subscription revenue. The following are excluded:

• One-time setup or onboarding fees
• Professional services and implementation charges
• Hardware or other non-recurring product sales
• Variable usage or overage charges that change month to month

Including non-recurring items inflates the run rate and makes growth comparisons unreliable. The discipline of counting only recurring revenue is what makes MRR and ARR useful as steady-state indicators.

Annual plans and MRR

When a customer pays for a year upfront, the full amount is collected at once, but it is spread evenly across the twelve months it covers for MRR purposes. A 12,000 annual plan contributes 1,000 to MRR each month.

This normalization keeps MRR a consistent measure of the monthly run rate regardless of how billing is structured. Two businesses with the same recurring revenue report the same MRR even if one bills monthly and the other bills annually. To track how that run rate changes from one month to the next, pair this converter with the MRR Growth Rate Calculator.