# How To Calculate ARR by Cohort in Drip | Arithmix

Learn how to calculate the Average Revenue per User (ARR) by cohort in Drip with our step-by-step guide. Maximize your revenue potential and gain valuable insights into your customer behavior.

ARR, or Annual Recurring Revenue, is a key metric for any subscription-based business. It measures the total amount of revenue that a business can expect to receive from its customers on an annual basis. Cohort analysis, on the other hand, is a powerful tool that allows businesses to group customers based on specific characteristics or behaviors. By combining these two concepts, businesses can calculate ARR by cohort, which provides a more accurate and detailed picture of their revenue streams.

## What Is ARR by Cohort?

ARR by cohort is a way of measuring the revenue generated by a specific group of customers over a given period of time. Cohort analysis groups customers based on a specific characteristic or behavior, such as the month they signed up for a subscription or the product they purchased. By analyzing the revenue generated by each cohort over time, businesses can identify trends and patterns that can help them make more informed decisions about their marketing and sales strategies.

For example, let's say a business wants to analyze the revenue generated by customers who signed up for a subscription in January. By grouping these customers into a cohort, the business can track their revenue over time and compare it to the revenue generated by customers who signed up in February or March. This can help the business identify any differences in behavior or spending patterns between the cohorts and adjust their strategies accordingly.

## When Is It Valuable To Calculate ARR by Cohort?

Calculating ARR by cohort is valuable for any subscription-based business that wants to gain a deeper understanding of their revenue streams. It can be particularly useful for businesses that are looking to:

• Identify trends and patterns in customer behavior
• Optimize their marketing and sales strategies
• Improve customer retention and reduce churn
• Forecast future revenue streams

By analyzing the revenue generated by each cohort over time, businesses can gain insights into the factors that drive customer behavior and adjust their strategies accordingly. For example, if a business notices that customers who sign up in the summer tend to spend more money than customers who sign up in the winter, they may want to adjust their marketing and sales strategies to target more customers during the summer months.

Overall, calculating ARR by cohort is a powerful tool that can help businesses gain a deeper understanding of their revenue streams and make more informed decisions about their marketing and sales strategies. By grouping customers based on specific characteristics or behaviors, businesses can identify trends and patterns that can help them optimize their revenue streams and improve customer retention.

## How Do You Calculate ARR by Cohort in Drip

Drip itself isn’t naturally geared towards letting you calculate complex metrics like ARR by Cohort. As an alternative, teams typically use products like Arithmix to import data from Drip and build out dashboards.

## What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Drip, combine it with data from other systems, and create calculations like ARR by Cohort.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.