Why ARR growth matters
ARR growth tracks recurring momentum without mixing in one-time revenue. It's useful for planning and for comparing recurring scale over time when you keep the ARR definition consistent.
Three ways to express ARR growth
- Period growth: (end ARR - start ARR) / start ARR.
- CMGR: compounded monthly growth over the period (useful for comparisons across horizons).
- Annualized growth (CAGR): converts the period change into an annualized rate.
Benchmarks and context
- ARR growth is lumpy for enterprise deals; compare trailing averages.
- CMGR is useful for short periods; annualized growth is better for longer horizons.
- Segment by plan or ACV band to separate true momentum from mix shifts.
ARR growth QA checklist
- Ensure start and end ARR snapshots use the same definition.
- Exclude one-time fees and services from ARR.
- Reconcile movements with the ARR waterfall to confirm drivers.
Common mistakes
- Using inconsistent ARR definitions (services/one-time items included sometimes).
- Comparing very short windows without adjusting for seasonality and deal timing.
- Mixing run-rate metrics (ARR) with recognized revenue (accounting).
What to pair with ARR growth
- Retention (NRR/GRR) so growth is durable, not leaky.
- Payback and burn multiple so growth is cash-feasible.
- Gross margin so growth quality improves profitability, not just top-line.