ARR vs MRR — When to Use Each
MRR is your operational heartbeat — it shows momentum week-to-week and drives decisions on hiring, spend, and channel investment. ARR is your benchmark metric — it's how your business is described to investors, acquirers, and the market.
Never convert monthly bookings to ARR by multiplying by 12. ARR = current MRR × 12, representing the current annualised run rate. Forward ARR (projected) should be clearly labelled as such.
The $1M ARR Milestone
Reaching $1M ARR is more than a vanity milestone. It signals enough revenue to attract Series A investors, enables annual contract discussions with mid-market customers, and provides enough data to measure cohort-level churn, NRR, and payback period with statistical significance.
SaaS Valuation Multiples and ARR
Public SaaS companies trade at 5–20× ARR depending on growth rate, NRR, and gross margin. Private companies at similar growth profiles typically command a 20–30% discount to public comparables.
The multiple is earned through growth: a company growing 100%+ YoY can command 15–25× ARR. A company growing 15% YoY will see 4–7× ARR. NRR above 120% adds meaningfully to multiples — it demonstrates that the existing base is compounding without new customers.
$1M
ARR threshold for most Series A conversations
$10M
ARR threshold for serious Series B interest
10×
Typical private SaaS ARR multiple (moderate growth)
20×
Multiple for 100%+ YoY growth + high NRR