How to Calculate Arr Growth Rate

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ARR Growth Rate Calculator

Annual Growth Rate 0%

function calculateArrGrowth() { var start = parseFloat(document.getElementById('startingArr').value); var end = parseFloat(document.getElementById('endingArr').value); var output = document.getElementById('arrGrowthOutput'); var wrapper = document.getElementById('arrResultWrapper'); var summary = document.getElementById('arrSummary'); if (isNaN(start) || isNaN(end) || start = 0) { output.style.color = "#2ecc71"; summary.innerHTML = "Your business grew by $" + netNewArr.toLocaleString() + " in Annual Recurring Revenue over this period."; } else { output.style.color = "#e74c3c"; summary.innerHTML = "Your business experienced a contraction of $" + Math.abs(netNewArr).toLocaleString() + " in Annual Recurring Revenue."; } }

Understanding ARR Growth Rate for SaaS

Annual Recurring Revenue (ARR) growth rate is the single most important metric for subscription-based businesses and SaaS startups. It measures the percentage increase in your predictable revenue over a 12-month period, providing a clear picture of how fast your company is scaling.

How to Calculate ARR Growth Rate

The formula for calculating ARR growth is straightforward but powerful. To find your growth percentage, subtract your starting ARR from your ending ARR, then divide that result by the starting ARR.

ARR Growth Rate = [(Ending ARR – Starting ARR) / Starting ARR] x 100

Key Components of ARR Growth

To truly understand what is driving your growth rate, you must look at the four components of "Net New ARR":

  • New Logos: Revenue from entirely new customers.
  • Expansion: Existing customers upgrading to higher tiers or adding seats.
  • Resurrection: Former customers who returned to the platform.
  • Churn & Contraction: Revenue lost from customers canceling or downgrading.

Real-World Example

Imagine a SaaS company, "CloudFlow," starts the fiscal year in January with $1,200,000 in ARR. By December 31st, after acquiring new clients and expanding existing accounts, their ARR stands at $2,100,000.

Using our calculator logic:

  • Ending ARR ($2,100,000) – Starting ARR ($1,200,000) = $900,000 (Net New ARR)
  • $900,000 / $1,200,000 = 0.75
  • 0.75 x 100 = 75% ARR Growth Rate

What is a "Good" ARR Growth Rate?

Benchmarks vary by stage, but the "T2D3" rule (Triple, Triple, Double, Double, Double) is often cited for venture-backed startups. Generally, for a SaaS company with $1M-$5M ARR, a growth rate of 100% or more year-over-year is considered exceptional, while 40-60% is considered healthy for mid-market companies.

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