Annual recurring revenue (ARR)

The annualised value of all active recurring subscriptions at a point in time: the sum of every customer's ARR. It is the north-star metric of a subscription business and the foundation every component metric builds on.

Total ARR = Sum of all active customers' annualised recurring subscription value

Conventions that keep the number honest: report net of perpetual discounts; exclude fixed-term discounts too and recognise the uplift as expansion when they expire; exclude one-time charges and implementation services (non-recurring, and they create false contraction when they end); recurring service charges can be included but track service ARR and product ARR separately; ignore credits and one-off adjustments; exclude usage overages unless customers sit in overage persistently past renewal. Err conservative: reporting a higher number than you get credit for is a bad trade.