MRR vs ARR for a bootstrapped SaaS: which number to report

A common way to get MRR vs ARR wrong goes like this. You run a year-end promotion, sell forty annual plans at €290, and collect €11,600 in December. It feels like the best month the business has had, so the update you send in January says ARR grew by €11,600.

It didn't. Those forty plans add €966.67 to MRR and €11,600 to ARR, but only because ARR is MRR times twelve, and forty annual plans are worth €966.67 a month whether the cash arrived in December or in instalments. The cash was real. The growth figure was a category mistake.

The rest of this post is about keeping those three things apart: MRR, ARR and cash.

What is the difference between MRR and ARR?

MRR, monthly recurring revenue, is the monthly value of your active paid subscriptions, with every billing period normalized to a month. How to compute it properly, including discounts, tax, trials and past-due subscriptions, is covered in how to calculate MRR.

ARR, annual recurring revenue, is the same thing expressed per year. For a subscription business it is MRR × 12.

That's the whole difference. They contain the same information. One is just twelve times bigger.

Is ARR a forecast of next year's revenue?

No, and this is the part that causes trouble. ARR = MRR × 12 is a definition. It says: if nothing changed, this is what a year of your current subscriptions would be worth. It is a statement about today, scaled up.

Next year's revenue will be different, because things will change. Some customers will churn, some will upgrade, new ones will arrive. If your MRR is €8,400, your ARR is €100,800. Whether you actually bill €100,800 over the next twelve months depends entirely on what happens to MRR during them.

So when someone says "we're at €100k ARR", read it as "€8.4k MRR, annualized". Nothing more is being claimed, and nothing more should be.

The term is also used loosely. In companies that sell annual contracts, ARR sometimes means the sum of signed annual contract values, including contracts that haven't started billing. In other places it means annualized revenue including one-time fees. If you use the word, say which you mean. For a bootstrapped product with self-serve subscriptions, MRR × 12 is the version least likely to mislead anyone, including you.

Which one should a bootstrapped SaaS track?

Track MRR. Mention ARR when the audience expects it.

At €1k to €50k MRR, the useful questions are monthly ones. Did last month's pricing change help? Did the post you published bring customers? Did churn spike after the redesign? MRR moves on the same timescale as your decisions, and its movements (new, expansion, reactivation, contraction, churn) explain what happened. ARR moves identically, only twelve times bigger, which makes small changes look more impressive and is no more informative.

There are a few cases where ARR is the natural unit:

• You mostly sell annual plans. If most of your revenue comes from yearly renewals, people will think in annual terms and ARR reads more naturally.
• You're talking to someone who thinks in ARR. Investors, acquirers and some partners use it by habit. Give them the number they expect, labeled clearly.
• You're comparing against an annual cost. Salaries and some contracts are quoted per year. Comparing a yearly cost to ARR saves a multiplication.

For your own weekly look at the business, MRR is enough.

How do annual plans affect MRR and cash?

This is where founders feel the gap most, because annual plans pull cash forward.

Say you have 120 customers on a €29 monthly plan and 40 on a €290 annual plan. MRR is:

• monthly: 120 × €29 = €3,480
• annual: 40 × €290 ÷ 12 = €966.67
• total: €4,446.67

Cash looks nothing like that. If the 40 annual renewals are spread evenly through the year, you collect roughly €967 a month from them and cash tracks MRR closely. If they all renewed in December because of a promotion, December brings €3,480 + €11,600 = €15,080 and the following eleven months bring €3,480 each.

MRR is identical in every one of those months. That is the point of it. It describes the size of the business, and it doesn't care when the money arrives.

Cash matters too, obviously. A bootstrapped business runs on it. Annual plans are a good way to fund the next few months without outside money. Just track cash as cash: what's in the bank, what's coming, how long it lasts. Don't let a cash spike stand in for growth, and don't let the quiet months after it convince you something broke.

One more practical point: an annual customer who decides to leave doesn't show up as churn until the renewal date. If you sell a lot of annual plans, your churn will look low and lumpy. The customers who stopped using the product in month four are still in MRR until month twelve. Watching usage, not only billing, is how you see them earlier.

What should go in an investor or update email?

Whether you're writing to investors, an advisor, a cofounder, or just keeping a monthly log for yourself, the same structure works. Keep it short and keep the definitions stable from one month to the next.

Subject: October update

MRR: €8,400 (ARR run rate €100,800)
Net new MRR: +€410
  New €620 · Expansion €140 · Reactivation €30
  Contraction −€90 · Churn −€290
Paying customers: 296 (+9)
Logo churn: 2.4% · Revenue churn: 4.8%
Cash: €38,200 · Runway: 14 months at current burn

What worked: the pricing page rewrite. Trial-to-paid
went from 11 of 90 to 17 of 96.
What didn't: the agency plan. 2 signups, both churned.
Next month: fixing failed-payment emails.
Ask: intros to anyone running a dev tools newsletter.

A few habits make updates like this trustworthy:

• Lead with MRR, give ARR as a run rate. Calling it a run rate signals that you know it is MRR × 12.
• Break net new MRR into its movements. A flat month made of big new MRR and big churn is a very different month from one where nothing happened. The breakdown is explained in net new MRR.
• Report churn with its denominator. Small customer counts make churn rates jumpy. Saying "7 of 287" is more honest than "2.4%" alone. More on that in how to calculate churn rate.
• Keep cash on its own line. Annual prepayments belong here, not in a growth figure.
• Don't count trials, signed-but-unstarted deals, or one-time fees as recurring revenue. If they matter, list them separately.
• Use the same definitions every month. If you change one, say so in the email and restate last month's figure under the new rule.

Why the bigger number doesn't help you

Some people will quote ARR because it's the larger figure. That's their business. But if you are the one reading your own numbers, the larger figure doesn't help you make decisions. €100,800 ARR and €8,400 MRR describe the same business. Only one of them maps neatly onto the month you just had.

Joinsight computes MRR and its five movements per customer, using the rules on the metric definitions page, and sends them in a Monday email, so the figures in your update are the ones you already looked at.