How to Calculate ARR
The math here is fairly simple. Here are some examples:
- A customer subscribes to a service for $10 a month on a one-year contract. To find the correct number, multiply the monthly cost by 12. This equals $120.
- Another customer subscribes for $20 a month on a two-year contract. This would be $480 for the duration of the contract, or $240 per year.
- Finally, a third customer pays $5 per month, on a month-to-month contract. The ARR would be calculated by how long they remain a customer (up to $60 per year if they remain on the contract for at least 12 months).
