MRR is monthly recurring revenue: the normalized monthly value of your active subscriptions. ARR is annual recurring revenue: the same thing expressed per year. In practice ARR = MRR × 12, and the interesting question isn't the arithmetic - it's which number to track, when, and what goes wrong when people convert between them.
The one-line difference
| MRR | ARR | |
|---|---|---|
| Stands for | Monthly recurring revenue | Annual recurring revenue |
| Formula | Σ monthly value of active subscriptions | MRR × 12 |
| Best for | Day-to-day operations, early-stage startups, spotting churn | Board decks, fundraising, enterprise / annual-contract businesses |
| Granularity | Monthly - you see problems in weeks | Annual - smooths noise, hides it too |
| Typical scale | < $100k | > $1M |
If you already know what MRR is and how to calculate it, ARR needs no new rules: normalize every plan to a monthly value, sum, multiply by twelve.
Converting between them
- MRR → ARR: multiply by 12. $8,500 MRR = $102,000 ARR.
- ARR → MRR: divide by 12. $1.2M ARR = $100,000 MRR.
That's it. Do not multiply this month's cash collected by 12 - a month with three annual renewals in it would produce an ARR that has nothing to do with the business. Always normalize to monthly first.
When to track MRR
Track MRR (and report it) when:
- You're early. Below roughly $1M ARR, monthly numbers are what you can actually act on. "We added $1,200 MRR this month" is a decision-sized fact; "$14,400 ARR" is the same fact wearing a suit.
- Customers pay monthly. If most of your subscriptions bill monthly, churn shows up monthly, and MRR is the metric that moves.
- You build in public. Founder communities, leaderboards and public revenue pages all speak MRR. It's the shared unit of comparison.
- You want to catch churn early. A 5% monthly churn problem is visible in one MRR report. In an ARR report it looks like a rounding error for a quarter.
When to track ARR
Switch to ARR (or report both) when:
- Contracts are annual. Enterprise deals signed for a year with annual invoicing are naturally ARR. Dividing them into twelfths is still correct, but the headline number is the yearly one.
- You're raising. Investors from Series A onward size companies in ARR - "$3M ARR growing 3× year-over-year." Multiples are quoted on ARR.
- The numbers are big. Past a few million, monthly figures are noisy and long. ARR compresses them into something a board can read.
Most companies don't switch so much as add: operations keep watching MRR weekly, while the deck says ARR.
Where ARR goes wrong
ARR is more flattering than MRR, which is why it gets inflated more often. The usual ways:
- Including non-recurring revenue. Onboarding fees, services, one-off licenses. These are revenue, but they don't recur, so they aren't ARR. Adding them is the most common ARR sin.
- Annualizing a peak month. Take the best month, multiply by 12. If November's MRR was $50k because of a Black Friday promo and December is $40k, ARR is $480k, not $600k.
- Counting contracted-but-not-yet-live deals. Signed contracts that start next quarter are bookings, not ARR. Some teams report "contracted ARR" separately; fine, as long as it's labeled.
- Ignoring churn timing. A customer on an annual plan who told you they're leaving in three months is still counted at full value until they actually leave. That's technically correct and practically misleading; keep a note of known churn.
- Currency mixing. Same problem as MRR: convert everything to one currency at a consistent rate before summing.
A good sanity check: if your ARR ÷ 12 doesn't match the MRR your billing system reports, one of them is wrong, and it's usually the ARR.
A quick example
A startup has 40 customers at $99/month, 5 customers on a $990/year plan, and did $4,000 of one-off consulting this month.
- Monthly customers: 40 × $99 = $3,960
- Annual customers: 5 × ($990 ÷ 12) = $412.50
- Consulting: excluded
MRR = $4,372.50, ARR = $52,470. The consulting is real money and belongs in revenue - just not in either recurring figure.
Which one does HitMRR use?
MRR. HitMRR ranks startups by monthly recurring revenue read directly from Stripe, because the founders racing here are mostly early-stage, mostly billing monthly, and comparing growth over 30-day races. Every figure on the leaderboard is normalized the way this article describes - annual plans divided by twelve, weekly plans × 52 ÷ 12, discounts subtracted, trials excluded - and converted to USD daily so different billing currencies rank fairly. If you need the ARR of any startup on the board, multiply by 12.