Annual Recurring Revenue (ARR) is the standardised measure of annualised contractual recurring revenue for subscription-based businesses — principally SaaS companies, cloud platforms or any B2B subscription model. It constitutes the most widely used size and momentum indicator in the startup ecosystem and in the valuation of recurring-revenue companies.

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Its formula is simple: ARR = MRR × 12. ARR excludes one-time revenues (implementation, one-off consulting, perpetual licences) to retain only the contractualised recurring component. An ARR of CHF 2.4 million means the company holds active contracts generating CHF 200,000 of recurring revenue per month.

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In startup and SaaS scale-up valuation, ARR is the reference multiple: market transactions typically occur at 3x to 15x ARR depending on growth rate, NRR, gross margin and churn profile. A SaaS company growing at +80% per year with 125% NRR and churn below 3% can command 12–15x ARR — a considerable premium over a traditional B2B company valued at 6–8x EBITDA.

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Example: a Swiss SaaS scale-up shows ARR of CHF 3.6 million (300 clients × CHF 12,000 average ARR). ARR growth rate: +65% over 12 months, NRR 118%, gross churn 4.5%. In 2025 market conditions, the pre-money valuation negotiated at Series B stands at CHF 25.0 million — approximately 6.9x ARR.

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At Hectelion, we value SaaS companies using ARR multiples and real options methods, anchored in the most recent market transaction data.