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ARR / MRR (Annual Recurring Revenue / Monthly Recurring Revenue)

Definition

ARR is the annualized value of all active subscription contracts, while MRR is the same figure on a monthly basis. These metrics are the primary revenue indicators for SaaS businesses. PMs monitor ARR/MRR growth, expansion, and contraction to understand how product changes affect commercial outcomes.

Why It Matters for Product Managers

Understanding arr / mrr is critical for product managers because it directly influences how teams prioritize work, measure progress, and deliver value to users. PMs monitor ARR/MRR growth, expansion, and contraction to understand how product changes affect commercial outcomes. Without a clear grasp of this concept, PMs risk making decisions based on assumptions rather than evidence, which can lead to wasted engineering effort and missed market opportunities.

How It Works in Practice

Product teams put this concept into action by integrating it into their regular workflow:

  • Adopt — Agree as a team on how and when to apply this practice, making it an explicit part of the team's working agreement.
  • Execute — Follow through consistently, treating the practice as a non-negotiable part of how the team operates.
  • Inspect — Regularly evaluate whether the practice is delivering the expected benefits and surface any friction.
  • Adapt — Adjust the approach based on what the team learns, keeping what works and discarding what does not.

    • The value of arr / mrr compounds over time. Teams that commit to it consistently see improvements in velocity, quality, and cross-functional alignment.

    Common Pitfalls

  • Treating this as a checkbox activity rather than embedding it into daily team habits.
  • Applying the concept rigidly without adapting it to the team's context and maturity level.
  • Failing to communicate the purpose behind the practice, which leads to team resistance.

    • Related Concepts

    To deepen your understanding, explore the related concept: Churn Rate.

    Related Terms

    Churn RateLTV (Customer Lifetime Value)Revenue Per User (ARPU)

    Frequently Asked Questions

    What is arr / mrr in product management?+
    ARR is the annualized value of all active subscription contracts, while MRR is the same figure on a monthly basis. Product managers use this concept to make more informed decisions and deliver better outcomes for users and the business.
    Why is arr / mrr important for product teams?+
    ARR / MRR is important because it provides structure and alignment that enable teams to ship faster, reduce waste, and maintain quality. Teams that adopt this practice consistently see improvements in collaboration, predictability, and user satisfaction.
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