# How To Calculate ARR by Cohort in FinancialForce | Arithmix

Learn how to calculate ARR by cohort in FinancialForce with this comprehensive guide. Discover the benefits of using this method and how it can help you make informed business decisions.

Calculating ARR (Annual Recurring Revenue) by cohort is a valuable technique for businesses to understand how their revenue is growing over time. It allows for a deeper analysis of customer behavior and revenue trends, which can inform strategic decisions. In this article, we will explore what ARR by cohort is, when it is valuable to calculate, and how to calculate it.

## What Is ARR by Cohort?

ARR by cohort is a method of analyzing revenue growth by grouping customers based on the time they signed up for a product or service. This allows businesses to track the revenue generated by each cohort over time, providing insights into how customer behavior and revenue trends change over time.

For example, a business may group customers who signed up in Q1 of 2020 into one cohort, and customers who signed up in Q2 of 2020 into another cohort. By tracking the revenue generated by each cohort over time, the business can see how revenue growth differs between the two groups.

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

ARR by cohort is particularly valuable for businesses that have a subscription-based revenue model, as it allows them to track the revenue generated by each cohort of customers over time. This can help businesses identify trends in customer behavior, such as changes in retention rates or upsell opportunities.

Additionally, ARR by cohort can be useful for businesses that are looking to expand into new markets or launch new products. By analyzing revenue growth by cohort, businesses can identify which cohorts are most valuable and focus their efforts on acquiring similar customers in new markets.

## How to Calculate ARR by Cohort

To calculate ARR by cohort, businesses need to first group their customers by the time they signed up for a product or service. This can be done by quarter, month, or any other time period that is relevant to the business.

Next, businesses need to calculate the total revenue generated by each cohort over time. This can be done by adding up the revenue generated by each customer in the cohort for each time period.

Finally, businesses can calculate the ARR for each cohort by dividing the total revenue generated by the number of customers in the cohort and multiplying by 12 (to get the annual recurring revenue).

For example, if a business has two cohorts (Q1 2020 and Q2 2020) and the total revenue generated by each cohort over the past year is \$500,000 and \$600,000 respectively, and each cohort has 100 customers, the ARR for each cohort would be:

Q1 2020: (\$500,000 / 100) * 12 = \$60,000

Q2 2020: (\$600,000 / 100) * 12 = \$72,000

By tracking the ARR for each cohort over time, businesses can gain valuable insights into customer behavior and revenue trends, which can inform strategic decisions and drive growth.

## How Do You Calculate ARR by Cohort in FinancialForce

FinancialForce 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 FinancialForce 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 FinancialForce, 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.