What is Arr financing & how does it work?

On ARR financings, lenders accept that the business they are lending to, or funding the acquisition of, will initially generate limited profit or even be loss-making. Without meaningful EBITDA to point to, the group’s performance is instead measured by how much revenue it can produce each year on a reliable, recurring basis.

What is annual recurring revenue (ARR)?

Annual recurring revenue (ARR) is a metric for quantifying a company’s growth, evaluating its subscription model, and forecasting its revenue. Breaking down ARR into individual components (ARR added from new customers, ARR added from upgrades, etc.) enables tracking which customer segments contribute the most to the company’s revenue generation.

What is accounting rate of return (arr)?

The accounting rate of return (ARR) is a formula that reflects the percentage rate of return expected on an investment or asset, compared to the initial investment's cost. The ARR formula divides an asset's average revenue by the company's initial investment to derive the ratio or return that one may expect over the lifetime of an asset or project.

What is Arr & why is it important for a SaaS business?

ARR is an invaluable metric for measuring the success of your SaaS business. In addition to calculating revenue for a one-year period, it also helps predict future growth and revenue based on the value of renewals and cost of churn, allowing you to manage expenses more easily.