What this calculator does
This ARR projection calculator shows where annual recurring revenue lands if current growth continues. Enter your existing ARR and an annual growth rate, and it returns projected ARR across the next three years, the equivalent monthly recurring revenue, and a year-by-year view of the growth path.
Compounding is why this is worth calculating rather than estimating. Growth rates that look similar on paper diverge sharply across three years, and the gap between a 50 percent plan and an 80 percent plan is far wider than the thirty-point difference implies. Seeing that gap clearly is usually the reason to run it.
When to use it
The most common use is building the top line of a funding model, since ARR growth drives valuation directly. It is also how you pressure-test a plan before presenting it — if the projection requires the business to grow sixfold in three years, the hiring and pipeline implications need to sit alongside it.
It is equally useful for capacity planning in reverse. Getting from £1.2 million to £7 million ARR means a support, infrastructure, and finance function sized for a very different company. Running the projection first shows when those investments must begin, which is nearly always earlier than a revenue-led plan implies.
Understanding the inputs
Current ARR should be contracted recurring revenue annualised and net of VAT, excluding implementation fees, consultancy, and usage overages that may not recur. If you cannot reconcile ARR back to signed subscription contracts, resolve that before projecting anything from it.
Growth rate is annual and compounds. Use actual trailing twelve-month growth as the base case rather than the plan, then run a downside at roughly two-thirds of that. Bear in mind that growth decays predictably as the base grows: a company tripling at £2 million ARR will not triple at £20 million, and a projection assuming otherwise will not survive questioning.
How is this calculated?
Monthly ARR = Previous ARR + New ARR − (Previous × Churn) + (Previous × Expansion). Track cumulative ARR over projection period.
A worked example
A UK SaaS business at £1.2 million ARR growing 80 percent annually reaches £2.16 million after one year, £3.89 million after two, and roughly £7.0 million after three, with MRR around £583,000 by the end. That path grows the business almost sixfold in three years.
Reduce growth to 50 percent and year three lands at about £4.05 million instead — a shortfall of nearly £3 million. At a 6 times ARR multiple, those thirty points of annual growth represent roughly £17.7 million of enterprise value. That is the case for investing in growth, stated in the terms a board actually responds to.
Limitations and assumptions
The model applies one constant growth rate, which no company sustains. Growth decays as the base expands, and a projection holding 80 percent for three consecutive years describes an unusual outcome rather than a typical one. Treat year three as illustration rather than forecast.
It also contains no explicit churn, expansion, or seasonality, and assumes new ARR keeps pace with a growing base — which requires the sales team, pipeline, and addressable market to scale with it. For a board or investor model, build upward from cohorts, net revenue retention, and pipeline coverage. Use this to compare scenarios and to see what compounding does over time.
Common Questions
- What is a good ARR growth rate?
- It depends heavily on scale. The T2D3 pattern — triple, triple, double, double, double — describes the path from roughly £2 million to £100 million and remains a common reference. In practice, above 100 percent is expected below £5 million ARR, while 30 to 50 percent is creditable beyond £50 million.
- How does ARR differ from turnover?
- ARR counts contracted recurring subscription revenue only, annualised and net of VAT. It excludes implementation fees, consultancy, and usage overages that will not automatically repeat. Turnover recognised in your statutory accounts will differ from ARR in most periods, and conflating the two costs credibility quickly during diligence.
- Why does net revenue retention matter more than new sales?
- Because expansion compounds without any acquisition cost attached. A business at 120 percent net revenue retention grows 20 percent a year with no new customers whatsoever. Past a certain scale, expansion typically contributes more growth than new logos, which is why investors weight retention so heavily in later rounds.
- How does churn affect the projection?
- It compounds against you. At 3 percent monthly churn you lose roughly 31 percent of the base each year, so gross new ARR must cover that before any growth appears. A projection built on gross additions without deducting churn will overstate year-three ARR substantially, often by a factor close to two.
- Should I project annually or monthly?
- Annually for ARR, since it smooths seasonality and matches how investors compare companies. Monthly is better operationally for catching a slowdown early. Take care converting between them: 5 percent monthly compounds to about 80 percent annually rather than 60, and that gap matters inside a plan.
- How far ahead can I project credibly?
- Twelve months with confidence, twenty-four with caveats, thirty-six as illustration only. Growth rates decay reliably as the base grows, so a flat-rate three-year projection is arithmetic rather than forecasting. Investors discount year three mentally whatever you present, so build the near years properly instead.
- Does R&D tax relief affect my growth plan?
- It affects cash rather than ARR, but the effect can be significant for a UK SaaS business investing heavily in development. Model the credit as a separate cash inflow with realistic timing rather than netting it against costs, and note that the rules have tightened considerably in recent years.
- Should I report ARR or MRR to my board?
- ARR for board reporting and fundraising, MRR for running the business. MRR exposes a weak month while it is still recoverable; ARR smooths it away. Where you sell annual contracts, ARR is also the more natural unit, since monthly figures are an artificial division of the contract value.
- What growth rate belongs in a fundraising deck?
- One that your last two quarters genuinely support, because it is the first thing diligence will test. Projecting 150 percent when trailing growth is 60 puts every other figure in the deck under suspicion. A credible plan with a visible path consistently outperforms an ambitious one without.