What is ARR?
Annual Recurring Revenue (ARR) is the yearly value of your recurring subscription revenue. It's simply MRR multiplied by 12 — a way to talk about business scale in annual terms instead of monthly.
ARR = MRR × 12
If your MRR is $5,000, your ARR is $60,000.
When to Use ARR vs MRR
Most indie hackers track MRR day-to-day because it's more sensitive to change. A $200 increase in a month is immediately visible in MRR; expressed as ARR it becomes a $2,400 increase that feels less urgent to act on.
ARR becomes more useful when:
- Talking to investors: enterprise SaaS investors prefer ARR because deals are structured annually
- Annual contracts: if most of your customers pay yearly, ARR reflects the actual cash flow better
- Benchmarking against larger companies: industry comparisons are almost always done in ARR
ARR Milestones That Matter
The SaaS industry has informal ARR milestones that serve as cultural markers:
| Milestone | What builders call it | |-----------|----------------------| | $10K ARR | First $10K — early validation | | $100K ARR | "Ramen profitable" zone for solo founders | | $1M ARR | The indie hacker holy grail | | $10M ARR | Small SaaS company territory |
The jump from $100K to $1M ARR is where most indie hackers spend the bulk of their career. The mechanics change significantly at each milestone.
ARR vs Total Revenue
Like MRR, ARR only counts recurring revenue. Annual subscriptions count fully (since they're recurring by definition). Lifetime deals, one-time purchases, and consulting revenue are excluded.
A business with $500K in lifetime deal sales and $0 in subscriptions has $0 ARR. That's not bad — it's just a different model. Makerfolio tracks both so you can show the full picture.
The ARR Trap
Obsessing over ARR too early can be misleading. At $1K MRR ($12K ARR), monthly fluctuations of even one customer are noise, not signal. Focus on MRR growth rate and churn until you're consistently above $10K MRR — then ARR becomes a meaningful anchor.