ARR (Annual Recurring Revenue)

ARR (Annual Recurring Revenue) is the annualised value of a SaaS or subscription company's recurring contractual revenue — normalised to a 12-month period. It excludes one-time fees and professional services revenue, capturing only the stable, predictable subscription base. ARR = MRR × 12, or the sum of all active annual contracts. It is the primary SaaS valuation metric: multiples of ARR (EV/ARR) replace EV/EBITDA for high-growth companies that prioritise growth over near-term profitability. Benchmarked against NRR, churn rate and CAC payback, ARR provides a complete picture of subscription business health.

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Example: a Swiss SaaS company with 120 active customers on annual contracts totalling CHF 4.2 million presents an ARR of CHF 4.2 million (+35% YoY). With an NRR of 118% and a churn rate of 7%, the ARR is growing organically — customers on average expand their spend each year. At an 8x ARR multiple (justified by the growth and NRR profile), enterprise value is CHF 33.6 million — versus CHF 14.0 million at a 7x EBITDA multiple if EBITDA were the basis.

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Hectelion uses ARR as the primary valuation anchor for SaaS and subscription companies, applying multiples calibrated to growth rate, NRR and business model maturity.