What is ARR and MRR?
Annual Recurring Revenue, or ARR, is one of essential metrics for businesses with recurring revenue models. ARR is the cumulative recurring revenue of all customers over a 12-month period. MRR is the cumulative recurring revenue of all customers on a monthly basis.
ARR (or MRR) is comprised of three components:
- New logo ARR (or MRR) which reflects revenue added by new customers.
- Expansion ARR (or MRR), which reflects revenue added by existing customers who expanded their subscription level (either by adding more seats / upgrading to a higher usage tier or buying another product component)
- Churned ARR (or MRR), which reflects revenue reduced because of existing customers who cancelled or lowered their subscription level (either by churning altogether or by decreasing their seat count / downgrading to a lower usage tier).
The sum all three of these makes up your net ARR or MRR number.
Here are three examples of ways to visualize ARR over time broken down by new, expansion or churned ARR:
ARR as a Line Chart
The first visualization is a line chart of the three different ARR components over time (months).
ARR as a Stacked Bar Chart
The second visualization is a stacked bar chart of the three different ARR componente over time (months), with an additional line graph of the number of new customers added in each month.
ARR as a Bar Line Chart
The third visualization is a bar line graph of ending ARR in each month with a line graph of the net ARR that was added each month.
We used Chartio for these visualizations. Chartio is a self-service business intelligence solution that enables everyone (not just data scientists) to connect to, analyze and understand their data. You can use Chartio for your data analytics here.