Annual recurring revenue (ARR) is a metric used in software-as-a-service, managed services, and subscription businesses, representing the annualised value of recurring revenue contracts in force at a point in time. ARR is the primary valuation reference metric for SaaS and MSP transactions, with multiples typically expressed as EV/ARR rather than EV/EBITDA at smaller scale.
ARR requires a consistent definition. Separate recurring subscription revenue from one-off work and assess growth, retention, margin and concentration before making valuation comparisons.