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What is Annual Recurring Revenue (ARR)?

The annual recurring revenue (ARR) metric represents the annualized value of the recurring revenue from active accounts in each period. The amount of ARR is based on the closed-won opportunities related to each customer account. This can be broken down into the different types of ARR in each period, including New Logo ARR, Expansion ARR, contraction ARR, churn ARR and ARR at the Start of Period.

Why is it important to measure our ARR?

ARR is perhaps the most important metric for any SaaS business. ARR provides a direct view of the development of revenue across different time periods. This metric is a must-have for any executive dashboard and general business report, as well as a great starting point for deep dive investigations of business performance trends.

How is ARR calculated?

The ARR metric is calculated by summing the annualized amount of recurring revenue attributed to the active accounts in each period. This sum excludes non-recurring amounts such as hardware or one-off onboarding costs. The metric indicates how ARR developed during the period by categorizing ARR into different components based on their source:

  • Start of period indicates the ARR at the beginning of the period.
  • New logo sums the ARR from accounts that did not have ARR in the preceding period. Note that this component looks at the immediately preceding period only; accounts may have had ARR in earlier periods.
  • Expansion sums the ARR from accounts that grew compared to the preceding period. This component presents the delta between the preceding and current periods.
  • Contraction sums the ARR from accounts that declined compared to the preceding period. This component presents the delta between the preceding and current periods.
  • Churned sums the ARR from accounts that were active in the preceding period, but have no ARR in the current period.

For a deep dive into ARR calculations, explore our article, Navigating the Complexities of ARR Calculations



All the SaaS revenue metrics you need

ARR is only one of the hundreds of SaaS metrics that are available out-of-the-box to users of the Sightfull revenue analysis and optimization platform. They include all the critical metrics required for SaaS companies - from indicators regarding campaigns and leads, through those that track pipeline, conversion and bookings, and all the way to later signals such as retention and expansion.

These highly precise customizable metrics are automatically calculated based on a large repository of SaaS industry standards, best practices and benchmarks. This saves lots of time for RevOps teams since they don’t have to rely on data analysts for support, waste time on error-prone spreadsheets, or manually create and update dozens of reports.

Sightfull users also receive dozens of pre-built dashboards based on these metrics, enabling them to easily investigate revenue trends at a highly granular level, identify their root causes, and act on proactive insights regarding time-sensitive business issues. 

Related Metrics

Also known as

  • Rolling annual recurring revenue
  • Rolling annual revenue
  • Annualized recurring revenue
  • Rolling ARR

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