How to calculate ARR from MRR

Updated 2026-08-04

ARR = MRR × 12

That's it. If your MRR is $6,180, your ARR is $74,160.

The part that actually matters

The formula is trivial; the input isn't. Everything that makes MRR wrong makes ARR wrong by a factor of twelve.

If you counted a $490 annual plan as $490 of MRR rather than $40.83, your ARR is overstated by $5,390 from that one customer. Multiply across a promotion and the error becomes absurd.

So the real work is upstream:

1. Calculate MRR properly — active subscriptions only, interval-normalised
2. Normalise annual plans — divide by twelve
3. Exclude one-off revenue
4. Then multiply by twelve

Don't annualise a month of cash

The most common shortcut is taking last month's total collected and multiplying by twelve. This is wrong for the same reason gross volume isn't MRR: a month with a lot of annual renewals produces an inflated figure, and a quiet month produces a depressed one.

Annualise normalised recurring revenue, never raw cash.

When ARR is genuinely different

Enterprise businesses sometimes compute ARR from committed contract value rather than current MRR. A signed $120,000 annual contract counts as $120,000 of ARR immediately, even though only one month has been billed.

If you're running self-serve subscriptions, this doesn't apply. More on the distinction.

Calculate both instantly.