What Is ARR?

What does ARR mean?

Annual recurring revenue, or ARR, is a SaaS metric that quantifies a company's predictable, annualized revenue from active subscriptions. Per Wall Street Prep, the simplest calculation multiplies monthly recurring revenue by twelve, while a more complete formula adds new, expansion, and renewal revenue and subtracts churned and contracted revenue. Any contract shorter than 12 months is typically excluded from the ARR definition, which keeps the metric focused on genuinely recurring, subscription-based revenue rather than one-time fees.

ARR matters because it reflects the sustainability of a business model, not just the size of a single period's revenue. A company can have a large total revenue figure built on one-time deals and still have a small, fragile ARR base.

Why ARR matters for product managers

How to Design OKRs treats ARR as one of the concrete, checkable numbers that make a key result real rather than aspirational. The bootcamp's practical challenge is built around a company where a Series B deal and a sales promise are both tied directly to specific ARR figures, forcing a PM to write objectives and key results that connect product work to revenue outcomes a CFO would actually recognize.

The bootcamp is explicit that vague objectives disguised as outcomes, like "be the best developer tool," fail this test, while a key result stated as a specific ARR or MRR target by a specific date gives the whole team something concrete to work toward and measure against.

ARR example

In How to Design OKRs' practical challenge, CodeForge, a developer productivity tooling company, has a sales team that promised a key enterprise prospect that a collaboration feature would ship by a set date. If the feature slips, the deal, worth about 80,000 dollars in ARR, is at risk, giving the OKR exercise a real revenue number attached to a real engineering deadline rather than an abstract priority argument.

That single figure changes how the PM has to sequence the roadmap: an 80,000 dollar ARR deal on the line is a concrete input into a prioritization decision in a way that a generic "customers want this" argument never could be.

How Builders Camp teaches ARR

Builders Camp teaches ARR inside the How to Design OKRs bootcamp, directed by Andre Albuquerque, using a practical challenge built entirely around rewriting a messy set of objectives and key results into ones tied to real, checkable revenue numbers.

Builders Camp runs live and self-paced bootcamps in product management and AI product building. See the How to Design OKRs bootcamp for the next cohort dates.