How To Calculate ARR by Cohort in Xero | Arithmix

Calculating ARR (Annual Recurring Revenue) by cohort is a valuable way to analyze your business's revenue growth over time. By grouping customers who signed up during the same period, you can see how their revenue contribution changes over time. This can help you identify trends and make informed decisions about your business strategy. In this article, we'll walk you through how to calculate ARR by cohort.

What Is ARR by Cohort?

ARR by cohort is a way of measuring the revenue generated by customers who signed up during the same period. For example, if you group all customers who signed up in Q1 2020, you can see how much revenue they generated in Q1 2020, Q2 2020, Q3 2020, and so on. This allows you to track how revenue from a particular cohort changes over time.

By comparing the revenue generated by different cohorts, you can identify trends in your business. For example, if you notice that the revenue generated by Q1 2020 cohort is decreasing over time, you may want to investigate why this is happening and take steps to address it.

When Is It Valuable To Calculate ARR by Cohort?

Calculating ARR by cohort is particularly valuable for businesses that have a subscription-based model, as it allows you to track the revenue generated by each cohort over time. This can help you identify trends in customer behavior and make informed decisions about your business strategy.

For example, if you notice that the revenue generated by a particular cohort is increasing over time, you may want to invest more resources in acquiring similar customers. On the other hand, if you notice that the revenue generated by a particular cohort is decreasing over time, you may want to investigate why this is happening and take steps to address it.

Overall, calculating ARR by cohort is a valuable way to analyze your business's revenue growth over time. By grouping customers who signed up during the same period, you can track how their revenue contribution changes over time and make informed decisions about your business strategy.

How Do You Calculate ARR by Cohort in Xero

Xero 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 Xero 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 Xero, 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 Xero 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 Xero 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.