ARR (Annual Recurring Revenue) refers to a company’s annual recurring revenue from ongoing subscriptions, contracts or other recurring revenue models. This metric is primarily used by Software-as-a-Service (SaaS) companies and other subscription-based business models to assess a company’s financial stability and growth.
ARR provides an overview of predictable and recurring revenue and is therefore regarded as an important indicator of sustainable growth and long-term customer retention.
Key ARR metrics include:
| Key figure | Meaning |
| New ARR | Annual recurring revenue generated by new customers or contract upgrades within a specific period. |
| Total ARR | Total annual recurring revenue from all active contracts and subscriptions. |
The ARR analysis helps companies to:
- Identifying growth potential
- To evaluate sales and marketing initiatives
- To better predict sales trends
- To demonstrate the company’s economic stability to investors
- Making strategic decisions based on reliable data
For start-ups with scalable business models in particular, ARR is a key metric for measuring a company’s success. innoWerft supports founders and companies in building sustainable business models, identifying relevant key performance indicators and developing growth strategies that drive long-term recurring revenue.