Definition · also called annual recurring revenue, annual run rate
ARR (annual recurring revenue) is the annualized value of a company's recurring subscriptions at a point in time. For most SaaS businesses it is simply current MRR × 12.
Like MRR, ARR is a snapshot of the subscription engine, not a forecast and not last year's revenue. A product that hits $10K MRR in December has a $120K ARR even if it earned $50K over the whole year.
ARR formula
ARR = MRR × 12
- Only recurring subscription revenue counts: no one-time fees, services, lifetime deals or one-off consulting.
- Companies selling annual contracts often compute ARR as the sum of annualized contract values, which gives the same answer.
- “Run-rate revenue” is looser: any month's total revenue × 12, recurring or not. It is often what people mean when they say “$1M ARR” about a product with one-time sales or ad income.
Worked example
You have $8,400 MRR from monthly plans and 50 annual customers paying $600/year ($2,500 MRR).
ARR = ($8,400 + $2,500) × 12 = $130,800.
If a one-off sponsorship brought in $20,000 this month, your run-rate revenue would look like $370,800, but your ARR is still $130,800.
When to quote ARR instead of MRR
Founders usually switch from MRR to ARR once the business sells annual contracts or passes milestones that sound better annualized. Investors, acquirers and SaaS benchmark reports (and valuation multiples) are almost always expressed against ARR. See MRR vs ARR for a side-by-side comparison.
ARR in practice: how indie makers use it
$1M ARR ($83,333 MRR) is the milestone that turns an indie product into a real company. Bootstrapped makers in the directory who reported crossing it:
ScrapingBee went from a pivot in June 2019 to $10K MRR in late 2020 and passed $1M ARR in November 2021, with two founders. It later sold to the Oxylabs group. (source: scrapingbee.com)
Helped Plausible Analytics cross $1M ARR in 2022 with no paid marketing and no outside funding. (source: plausible.io)
Tally reached about $175K MRR (around $2M ARR) in February 2025, still bootstrapped, with a very small team. (source: indiehackers.com)
HeyReach reported about $2M ARR in October 2024, passed $10M around December 2025 and more than $19M ARR in October 2026, all without outside funding. (source: arr.club)
Snappa peaked at about $1.6M ARR and later reported just under $1M while being rebuilt: ARR can go down as well as up. (source: indiehackers.com)
Paperform reached about $3.5M ARR in 2023 without investors, after starting as a two-person lifestyle business. (source: substack.com)
From our data: how long indie makers took
| Milestone | Makers who reached it | Median time (dated makers) | Middle half |
|---|---|---|---|
| $1K MRR | 112 | < 1 yr (n=22) | < 1 yr – 1 yr |
| $10K MRR | 97 | 1 yr (n=15) | < 1 yr – 2 yrs |
| $1M ARR | 49 | 3 yrs (n=13) | 1 yr – 4 yrs |
| $100K MRR | 40 | 3 yrs (n=9) | 2 yrs – 4 yrs |
Years from the year a maker started to the first year a self-reported figure reached each level. Medians use only makers whose crossing year is pinned down. Full method and every data point: maker journeys.
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Frequently asked questions
How do you calculate ARR?
Multiply current monthly recurring revenue by 12. If you sell annual contracts, add up the annual value of every active contract instead; the result is the same.
Is ARR the same as annual revenue?
No. Annual revenue is what you actually earned over a year, including one-time sales. ARR is a snapshot of recurring revenue right now, annualized.
What does $1M ARR mean?
It means the business currently has about $83,333 in monthly recurring revenue. It does not mean the company earned $1M last year.
Does ARR include usage-based revenue?
Committed minimums count. Variable usage is usually reported separately or as a trailing average, because it may not repeat; state your method when you share ARR.
Related terms
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Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.