Definition
ARR (Annual Recurring Revenue)
Annualised value of contracted, recurring subscription revenue at a point in time.
ARR captures the steady-state run-rate of subscription revenue, excluding one-offs, professional services, and usage-based overage unless explicitly classified as recurring. Diligence centres on the quality of ARR: contract length, billing terms, multi-year vs. monthly, the share that is usage-priced and therefore at-risk, and the discount that should be applied for at-will cancellation rights.
See also
Read further in The Guide
ARR Quality Assessment for SaaS Targets
Framework for assessing Annual Recurring Revenue (ARR) quality in SaaS M&A targets, focusing on contractual terms, billing practices, expansion revenue, and cohort analysis.
SaaS Valuation Multiples — Where the Market Sits
Analysis of SaaS valuation multiples in public and private markets, reviewing comparable selection, and outlining the typical discount layers applied by M&A buyers.