How ARR and MRR Differ in a Recurring Revenue Business
Annual Recurring Revenue is the annualised value of contracted recurring revenue at a point in time. Monthly Recurring Revenue is the same figure expressed at monthly resolution. ARR equals MRR multiplied by twelve when the subscription terms are uniform. The distinction that matters most is definitional: both metrics must exclude one-time fees, professional services revenue, and contracts that have not yet commenced. Contracted but not yet live revenue is treated differently by different investors, and the methodology must be documented and applied consistently across all periods.
The error most commonly made is using different ARR definitions across different reporting periods, or including revenue categories that a Series A investor would exclude on review. A company that has to restate its ARR during a due diligence process has introduced a credibility problem that the correct number alone cannot fully resolve.
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