Annual Recurring Revenue Calculator
ARR from monthly subscriptions, annual contracts and multi-year deals spread across their term — with setup fees and professional services entered separately, so you can watch the money that does not count stay out of the number.
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ARR is monthly recurring revenue times twelve, plus contracts spread across their term. The hard part is the numerator — so this annual recurring revenue calculator asks for the excluded lines too, and shows you them not counting.
Recurring revenue
Subscriptions billed monthly. MRR.
Yearly value of contracts billed annually.
Total across the whole term, not per year.
Years. The value above is divided by this.
Not recurring revenueexcluded from ARR
Real revenue. Not recurring revenue.
Consulting and training. Also excluded.
| Source | Working | ARR contribution |
|---|---|---|
| Monthly subscriptions | $50,000 × 12 | $600,000 |
| Annual contracts | as billed | $240,000 |
| Multi-year contracts | $600,000 ÷ 3 yrs | $200,000 |
| ARR | $1,040,000 |
Counting the $75,000 of setup fees and services would report $1,115,000 — overstating ARR by 7.2%. That money is real and belongs in your revenue line; it is simply not recurring, and a buyer will take it out again.
What never counts
- Set-up and onboarding fees
- Implementation and installation costs
- Professional services and consulting
- Training delivered as a one-off
- Usage overages that are not contracted
ARR is the number a buyer diligences hardest, so it is worth being able to defend line by line. If you are building the product largely on your own, Tekk turns what you want into specs your coding agent can actually execute.
The formula
ARR = MRR × 12
ARR from a multi-year contract = total contract value ÷ years
That is the whole calculation. Every difficulty in ARR is a question about what belongs in it.
Worked example
| Source | Working | ARR |
|---|---|---|
| Monthly subscriptions | $50,000 × 12 | $600,000 |
| Annual contracts | as billed | $240,000 |
| Multi-year contracts | $600,000 ÷ 3 years | $200,000 |
| ARR | $1,040,000 | |
| MRR equivalent | $1,040,000 ÷ 12 | $86,667 |
And separately, revenue that is real but not recurring:
| Excluded | Amount |
|---|---|
| Setup and implementation | $30,000 |
| Professional services | $45,000 |
| Total | $75,000 |
Count those and ARR reads $1,115,000 — 7.2% overstated. Not a dramatic number, which is precisely why it survives so many board decks before someone checks.
What never counts
The rule comes from the same place the formula does. WallStreetPrep states that "one-time fees such as set-up fees, professional service (or consulting) fees, and installation costs must be excluded, since they are one-time/non-recurring."
In practice that means:
- Set-up and onboarding fees
- Implementation and installation
- Professional services and consulting
- One-off training
- Usage above a contracted minimum
None of this is a judgement about whether the revenue is good. Implementation fees can be excellent business. They are simply not evidence about next year, and ARR exists to be evidence about next year.
The multi-year mistake
A three-year contract worth $600,000 contributes $200,000 of ARR, not $600,000.
Booking the full value in the signing year does two bad things at once: it inflates that year, and it creates an apparent collapse the following year when nothing replaces a deal that was never annual in the first place. The pattern is recognisable enough that it invites questions about everything else in the model.
Run rate, not trailing revenue
ARR is a snapshot: the annualised value of what is under contract today. It is not the sum of the last twelve months' billings.
The distinction matters most exactly when the company is changing fastest. A business that tripled during the year has a trailing figure far below its run rate, and one that lost half its customers has a trailing figure far above it. Reporting the wrong one is flattering in one direction and alarming in the other, and in both cases wrong.
How it works
- 1
Enter each kind of contract separately
Monthly subscriptions get multiplied by twelve. Annual contracts count at their yearly value. Multi-year deals are divided by their term, because a three-year contract worth $600,000 contributes $200,000 a year, not $600,000 once.
- 2
Enter the excluded revenue too
Setup fees and professional services have their own fields, greyed apart from the rest. This annual recurring revenue calculator asks for them deliberately: a tool that never mentions them cannot show you that they do not belong in ARR.
- 3
Compare the two totals
You get the defensible figure and, beside it, what the number would read if you counted everything — with the overstatement as a percentage. That gap is the one a buyer removes during diligence, so it is better to see it before they do.
Frequently asked questions
- How do you calculate ARR?
- Multiply monthly recurring revenue by twelve, then add the annualised value of any contract not billed monthly. The annual recurring revenue calculator above divides a multi-year contract by its term: $50,000 over four years contributes $12,500 of ARR, not $50,000.
- What should be excluded from ARR?
- Anything that will not repeat. WallStreetPrep puts it plainly: one-time fees such as set-up fees, professional service or consulting fees, and installation costs must be excluded, because they are non-recurring. They are real revenue and belong in your income statement — they are simply not recurring revenue.
- What is the difference between ARR and revenue?
- Revenue is everything you earned. ARR is only the part contracted to repeat, expressed as a yearly run rate. A company with $1,040,000 of ARR and $75,000 of implementation work has $1,115,000 of revenue and $1,040,000 of ARR, and quoting the larger number as ARR is the error this page exists to prevent.
- Is this an ARR calculator or an MRR calculator?
- Both, since one is twelve times the other. Enter monthly figures and this arr calculator reports the annual total; the MRR equivalent is shown alongside so you can reconcile against a dashboard that reports monthly.
- How do I handle a multi-year contract?
- Divide the total contract value by the number of years. It is the single most common mistake in an arr calculator — a three-year deal booked at its full value inflates ARR threefold in the year it is signed, and then appears to collapse in the following year when nothing replaces it.
- Should ARR be measured at a point in time or over a year?
- At a point in time. ARR is a run rate — the annualised value of what is under contract today — not a sum of what was billed over the last twelve months. That backward-looking figure exists too and is usually called trailing revenue; confusing the two makes a growing company look smaller and a shrinking one look larger.
- Do usage-based charges count?
- Contracted minimums do; overages above them generally do not. If a customer commits to $2,000 a month and routinely spends $3,000, the defensible ARR contribution is $24,000. Some companies report the higher figure, and every buyer adjusts it back down.
- Does ARR include discounts?
- Yes — use the net amount actually contracted. ARR is what customers pay, not list price. A three-month free trial inside an annual contract reduces that year's value and should be reflected rather than annualising the post-trial rate from day one.
- What about customers who are about to churn?
- They count until they leave. ARR is a snapshot of contracted revenue, not a forecast, so a customer who has given notice but is still under contract is still in the number. What matters is disclosing it — an ARR figure with a known cancellation behind it is a credibility problem rather than a maths one.
- Why does my ARR not match twelve times my MRR?
- Usually because annual and multi-year contracts are being counted in one place and not the other, or because a mid-month change is annualised differently in the two systems. This annual recurring revenue calculator shows each source's contribution separately so you can find which line disagrees.
- Why do investors care about ARR rather than revenue?
- Because it is predictive. Revenue tells you what happened; ARR tells you what will keep happening if nothing changes. That is why the exclusions are enforced so strictly — every non-recurring dollar left in the number makes it worse at the one job it has.
- Do you store the numbers I enter?
- No. The calculation runs entirely in your browser. Nothing is sent to a server, nothing is logged, and there is no account — worth knowing before you type your contract values into a web page.
- Why is this free, and what is Tekk?
- Tekk is a spec-driven development platform for people building software with AI coding agents. This calculator costs us nothing to run, and the founders preparing a board pack are often the same people building the product. No signup, no run limit, no upsell inside the tool.
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