If you've spent any time in SaaS circles, you've seen both MRR and ARR thrown around. They're related — but they're not interchangeable. Here's the difference.
The definitions
MRR (monthly recurring revenue) is the predictable revenue your business generates each month. If you have 100 customers paying $20/month, your MRR is $2,000.
ARR (annual recurring revenue) is your MRR multiplied by 12. Using the same example: $2,000 × 12 = $24,000 ARR.
That's the entire technical difference. ARR is just MRR annualized.
Why two metrics exist
ARR became the standard metric in enterprise SaaS because enterprise deals are sold and measured annually. A $100,000 contract is more naturally expressed as "$100K ARR" than "$8,333 MRR."
For consumer and SMB SaaS — the world most indie hackers live in — monthly billing is common and monthly thinking is natural. MRR fits better.
When to use MRR
Use MRR when:
- You bill monthly (most indie products do)
- You're tracking growth week-to-week or month-to-month
- You want to understand churn at the monthly level
- You're building in public and sharing milestones
The $1K MRR, $5K MRR, $10K MRR milestones that indie hackers celebrate are all monthly. The community tracks monthly because monthly is actionable.
When to use ARR
Use ARR when:
- You sell annual contracts
- You're talking to investors who use ARR as their standard
- You want a bigger-sounding number in a pitch deck (honestly, that's most of it)
- You're modeling annual operating costs against revenue
The conversion trap
One thing to watch: if you mix annual subscribers with monthly subscribers without normalizing, your MRR calculation breaks. An annual subscriber paying $240/year contributes $20/month to MRR — not $240.
Always divide annual contracts by 12 before adding them to your MRR figure. Do the same in reverse: to get ARR from MRR, multiply by 12. Don't just sum up all annual contracts separately.
Which one should you track?
For most bootstrapped founders: track MRR.
It's the number your payment processor shows you. It's the number the indie hacker community uses. It's the number you update on MRR.fyi. It gives you monthly feedback loops — fast enough to act on.
ARR is useful when you want to talk about your business in annual terms, or when you start selling annual plans and want to think about the full contract value. Until then, MRR tells you everything you need to know.
The goal is to know your number. Pick the one you'll actually track consistently.