ARR vs MRR: What They Mean and How to Calculate Them
MRR and ARR are the headline metrics of any subscription business. Here is exactly what each means, how to calculate them, and the mistakes that inflate them.
If you run a subscription business, MRR and ARR are the two numbers every investor will ask for. They are simple — but founders routinely inflate them by accident, which is worse than not tracking them at all.
MRR — Monthly Recurring Revenue
MRR is the predictable, recurring revenue you earn each month from subscriptions. Add up every active subscription's monthly value. Normalise annual plans to their monthly equivalent (an annual plan of ₹12,000 is ₹1,000 of MRR).
ARR — Annual Recurring Revenue
ARR annualises your current MRR into a run rate. It is a snapshot of where you are *today*, projected over a year — not what you actually billed over the last twelve months. Use ARR for headline scale; use MRR to watch month-to-month momentum.
The mistakes that inflate MRR/ARR
- •Counting one-time fees — setup, onboarding and professional-services fees are not recurring. Excluding them is the most common fix.
- •Confusing run-rate with realised revenue — ARR is a projection; do not present it as money in the bank.
- •Calling non-subscription revenue MRR — if customers buy once, you do not have MRR. See MRR vs revenue for D2C.
Runway computes MRR and ARR from your live Stripe and Razorpay data — and adapts the vocabulary to your revenue model, so transactional businesses are not handed a misleading "MRR".
Frequently asked
How do you calculate ARR from MRR?
ARR = MRR × 12. It annualises your current monthly recurring revenue into a run rate.
Does ARR include one-time fees?
No. ARR and MRR count only recurring revenue. One-time fees (setup, professional services, one-off purchases) should be excluded.