How To Calculate ARR by Cohort in Method CRM | Arithmix

Calculating ARR (Annual Recurring Revenue) by cohort is a powerful way to understand the revenue generated by customers who joined your business in a specific period. It helps you to identify trends and patterns in your customer base, and can inform your marketing and sales strategies going forward. In this article, we'll explain what ARR by cohort is, when it's valuable to calculate it, and how to do so using Method CRM.

What Is ARR by Cohort?

ARR by cohort is a way of measuring the revenue generated by a group of customers who joined your business in a specific period. A cohort is simply a group of customers who share a common characteristic, such as the month they signed up for your service or the product they purchased. By calculating ARR by cohort, you can see how much revenue each cohort generates over time, and how that revenue changes as the cohort ages.

For example, let's say you have a SaaS business that offers a monthly subscription service. You might want to calculate ARR by cohort for customers who signed up in January, February, and March of this year. By doing so, you can see how much revenue each cohort generates each month, and how that revenue changes over time. This can help you to identify trends and patterns in your customer base, and to make data-driven decisions about your marketing and sales strategies.

When Is It Valuable To Calculate ARR by Cohort?

Calculating ARR by cohort is valuable in a variety of situations. For example:

• If you're a SaaS business, you might want to calculate ARR by cohort to understand how much revenue each cohort generates over time, and to identify trends and patterns in your customer base.
• If you're a subscription box business, you might want to calculate ARR by cohort to understand how much revenue each cohort generates each month, and to identify which products are most popular among different cohorts.
• If you're a B2B business, you might want to calculate ARR by cohort to understand how much revenue each cohort generates over the course of a contract, and to identify which types of customers are most valuable to your business.

Overall, calculating ARR by cohort can help you to make data-driven decisions about your business, and to optimize your marketing and sales strategies based on the characteristics of your customer base.

How to Calculate ARR by Cohort

To calculate ARR by cohort, you'll need to follow these steps:

1. Identify the cohorts you want to analyze. This might be based on the month customers signed up, the product they purchased, or another characteristic.
2. Calculate the total revenue generated by each cohort over a specific period of time. This might be monthly, quarterly, or annually, depending on your business model.
3. Divide the total revenue generated by each cohort by the number of customers in that cohort to get the average revenue per customer.
4. Repeat this process for each cohort you're analyzing.
5. Plot the average revenue per customer for each cohort over time to see how it changes as the cohort ages.

By following these steps, you can calculate ARR by cohort and gain valuable insights into your customer base. Whether you're a SaaS business, a subscription box business, or a B2B business, understanding your customer cohorts can help you to make data-driven decisions and optimize your marketing and sales strategies for maximum revenue growth.

How Do You Calculate ARR by Cohort in Method CRM

Method CRM 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 Method CRM 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 Method CRM, 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.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating ARR by Cohort in Arithmix

Calculating metrics like ARR by Cohort is simple in Arithmix. Once you've created your free account, you’ll be able to import your Method CRM data, and use it to create natural language formulas for metrics like ARR by Cohort.

Arithmix is designed to give you the power to build any calculations you want on top of your Method CRM data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.