Defining Annual Recurring Revenue (ARR) is essential for SaaS companies, but those with usage-based pricing face challenges in determining whether to include variable revenue. Analyzing 14 publicly traded SaaS companies revealed three common approaches: simple annualization, a hybrid model combining contracts and usage, and excluding usage-based revenue for predictability. Choosing the right method depends on growth patterns, investor expectations, and revenue stability, ensuring that ARR accurately reflects business performance.
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How to calculate Gross Revenue Retention (GRR) and Net Revenue Retention (NRR) and understand the difference between the two metrics.
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In this video, I'll explain the difference between Bookings ACV and ARR and how to use them to answer critical SaaS investor questions.
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