ARR Projection Calculator
Project Annual Recurring Revenue growth with churn and expansion assumptions.
What this calculator does
This ARR projection calculator shows where your annual recurring revenue lands if current growth continues. Enter your existing ARR and an annual growth rate, and it returns projected ARR over the next three years, the equivalent monthly recurring revenue, and a year-by-year breakdown of the growth path.
Compounding is the reason this is worth doing rather than estimating. Growth rates that differ modestly on paper diverge dramatically over three years, and the gap between a 40 percent plan and a 60 percent plan is far larger than the twenty-point difference suggests. Seeing that gap is usually the point of running the projection.
When to use it
The most common use is building the top line of a fundraising model, where ARR growth drives valuation directly. It is also how you sanity-check a plan before presenting it — if the projection requires quadrupling in three years, the hiring and pipeline implications need to be visible alongside it.
It is equally valuable for capacity planning in the other direction. Reaching $10 million ARR from $2.4 million means a support, infrastructure, and finance function sized for a very different company. Running the projection first tells you when those investments need to start, which is invariably earlier than a revenue-focused plan suggests.
Understanding the inputs
Current ARR should be contracted recurring revenue annualized, excluding implementation fees, professional services, and usage-based overages that may not repeat. If you cannot reconcile ARR to your subscription contracts, fix that before projecting from it.
Growth rate is annual and compounds. Use your actual trailing twelve-month growth as the base case rather than the plan, then run a downside at roughly two-thirds of it. Remember that growth rates decay 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 scrutiny.
How is this calculated?
Monthly ARR = Previous ARR + New ARR − (Previous × Churn) + (Previous × Expansion). Track cumulative ARR over projection period.
A worked example
A SaaS business at $2.4 million ARR growing 60 percent annually reaches $3.84 million after one year, $6.14 million after two, and roughly $9.83 million after three — with MRR at about $819,000 by the end. That path more than quadruples the business in three years.
Drop the growth rate to 40 percent and year three lands at roughly $6.59 million instead, a difference of $3.24 million. Applying a 6 times ARR multiple, those twenty points of annual growth are worth close to $19 million in enterprise value. That is the argument for investing in growth, expressed in the terms a board responds to.
Limitations and assumptions
The model applies a single constant growth rate, which no company sustains. Growth decays as the base grows, and a projection holding 60 percent for three consecutive years describes an outcome that is rare rather than typical. Treat year three as illustrative rather than as a forecast.
It also has no explicit churn, expansion, or seasonality, and assumes new ARR keeps pace with a larger base — which requires the sales team, pipeline, and market size to scale accordingly. For a board or investor model, build up from cohorts, net revenue retention, and pipeline coverage. Use this for scenario comparison and to see what compounding does over time.
Common Questions
- What is a good ARR growth rate?
- It depends entirely on scale. The T2D3 pattern — triple, triple, double, double, double — describes the path from roughly $2 million to $100 million and remains a common benchmark. In practice, growth above 100 percent is expected below $5 million ARR, while 30 to 50 percent is respectable past $50 million.
- What is the difference between ARR and revenue?
- ARR counts only contracted recurring subscription revenue, annualized. It excludes implementation fees, professional services, usage overages, and anything else that will not automatically repeat. Recognized revenue under accounting rules will differ from ARR in most periods, and conflating the two is a reliable way to lose credibility in diligence.
- Why does net revenue retention matter more than new sales?
- Because expansion compounds without acquisition cost. A company at 120 percent net revenue retention grows 20 percent annually with no new customers at all. Past a certain scale, expansion revenue typically contributes more growth than new logos, which is why investors weight retention so heavily in later-stage diligence.
- How does churn affect an ARR projection?
- It compounds against you. At 2 percent monthly churn you lose roughly 22 percent of the base annually, so gross new ARR must cover that before any growth registers. A projection built on gross additions without subtracting churn will overstate year-three ARR substantially — frequently by a factor approaching two.
- Is annual or monthly growth the right basis?
- Annual is standard for ARR because it smooths seasonality and matches how investors compare companies. Monthly is more useful operationally for spotting a slowdown early. Just be careful converting: 5 percent monthly growth compounds to about 80 percent annually, not 60, and the distinction matters in a plan.
- How far ahead can I credibly project?
- Twelve months with confidence, twenty-four with caveats, thirty-six as illustration only. Sustained growth rates decay reliably as the base grows, so a three-year projection at a flat rate is a mathematical exercise rather than a forecast. Investors mentally discount year three regardless of what you present.
- What is the Rule of 40 and how does it relate to growth?
- It holds that growth rate plus profit margin should exceed 40. It matters here because growth achieved through unsustainable burn scores no better than slower profitable growth. A projection showing 80 percent growth is only compelling if the burn required to deliver it is also visible alongside it.
- Should I project in ARR or MRR?
- ARR for board reporting and fundraising, MRR for operational management. MRR shows a bad month while it is still fixable; ARR smooths it into invisibility. If 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 should I put in a fundraising deck?
- One your last two quarters actually support, because that is the first thing diligence tests. Projecting 150 percent when trailing growth is 60 puts every other number in the deck under suspicion. A credible plan with a clear path is consistently more persuasive than an ambitious one without.