Team Churnkey
Annual Recurring Revenue (ARR) isn’t just a metric; it’s the lifeblood of every subscription-based business.
This guide introduces a simple, interactive SaaS ARR calculator to help you calculate your ARR in real-time, using core inputs to evaluate Net New ARR, Contraction, Churn, and more.
ARR=Gross New ARR+Expansion ARR+Reactivation ARR−Contraction ARR−Churn ARR+Previous Year's ARR
Components of an ARR calculator
- Gross New ARR
Represents the ARR generated from new customers in a given period. - Expansion ARR
Measures the added revenue from existing customers, including upgrades or additional products purchased. - Contraction ARR
Captures the ARR lost due to downgrades, such as customers reducing their subscription plans or seat counts. - Churn ARR
The total ARR lost from customers who cancel their subscriptions. - Reactivation ARR
Revenue from customers who re-subscribe after canceling. - Previous ARR
The total ARR from the last period, serving as a base to build on.
SaaS ARR calculator
Enter your figures to instantly calculate ARR based on these components. Adjust any input, and see how each change affects your bottom line. This live calculator will break down your Total ARR and Net New ARR, providing a quick look at how ARR is growing (or shrinking) over time.
Net New ARR
$750,000
New + Expansion + Reactivation − Contraction − Churn
Total ARR
$7,750,000
Previous ARR + Net New ARR
Total MRR
$645,833
Total ARR ÷ 12
A higher churn rate directly lowers ARR. At your current churn rate you're losing 26% of your recurring revenue every year — even a small reduction can significantly boost ARR.
| Churn rate | ARR |
|---|---|
| Decrease by 2% | $7,890,000 |
| Decrease by 4% | $8,030,000 |
| Decrease by 5% | $8,100,000 |
| Decrease by 7% | $8,240,000 |
Would you like to decrease churn?
Churn has two parts: voluntary and involuntary — you lose either customers (#) or revenue ($). The best way to cut voluntary churn is a great Cancel Flow with trial extensions, pause walls, and offers personalized to each user. Then tackle involuntary churn with Precision Retries, dunning email campaigns, and Reactivations.
Churnkey has a free churn-metrics product to help you understand your numbers, and our full retention platform saves 20–40% of the customers you'd otherwise lose to churn.
Explore ChurnkeyARR calculator formula explanation
Suppose you have the following metrics for this year:
- Gross New ARR = $2,000,000
- Expansion ARR = $600,000
- Contraction ARR = $100,000
- Churn ARR = $1,800,000
- Reactivation ARR = $50,000
- Previous ARR = $7,000,000
Here’s how these components contribute to your Total ARR and Net New ARR:
Calculating Net New ARR:
Net New ARR = Gross New ARR + Expansion ARR + Reactivation ARR − Contraction ARR − Churn ARR = 750,000
Calculate Total ARR:
Total ARR = Previous ARR + Net New ARR = 7,750,000
How Churnkey can help improve ARR?
We’re everything your customer-obsessed team needs to improve retention, automatically. With Churnkey, companies save 20-40% of the revenue they would have otherwise lost to churn. If you aren't yet sure how retention impacts your business, use our free churn metrics product.
To improve your ARR, sign up for Churnkey or book a demo.
ARR benchmarks
After launching
| Time to $1M ARR | Good | Great |
|---|---|---|
| After launching | 1 year | 9 months |
After $1M ARR
| Year | Good Growth Rate | Great Growth Rate |
|---|---|---|
| Year 1 | 3x YoY (10% MoM) | 5x YoY (16% MoM) |
| Year 2 | 3x YoY (10% MoM) | 4x YoY (12% MoM) |
| Year 3 | 2x YoY (5% MoM) | 3x YoY (10% MoM) |
| Year 4 | 2x YoY (5% MoM) | 2.5x YoY (8% MoM) |
| Year 5 | 2x YoY (5% MoM) | 2.5x YoY (8% MoM) |
By funding round
| Funding Round | Good Growth Rate | Great Growth Rate | Below Expectations |
|---|---|---|---|
| Series A | $1M ARR, 2-3x YoY | $1M ARR, 3x+ YoY | <$1M ARR, <2x YoY |
| Series B | $5M ARR, 2-3x YoY | $5M ARR, 3x YoY | <$5M ARR, <2x YoY |
| Series C+ | $20M ARR, 1-2x YoY | $20M ARR, 2-3x YoY | <$20M ARR, <1x YoY |
Additional reading
Retention Cohort Analysis: Four Simple Ways
Retention automation separates growth heroes from growth zeroes
Calculate Customer Retention Rate and Revenue Retention [Calculator]
Customer Retention Curve: Calculator, Definition, Examples
Customer Exit Survey: 21 Templates, Questions, and Best Practices
Understanding the FTC’s New Negative Option Rule and Its Impact on Free Trials