How To Calculate Cost of Annual Recurring Revenue in Odoo ERP | Arithmix

Calculating the cost of annual recurring revenue (ARR) is an important metric for any business that relies on recurring revenue streams. It helps businesses understand the true cost of acquiring and retaining customers over a given period of time. In this article, we will explore what ARR is, when it is valuable to calculate it, and how to calculate it using Odoo ERP.

What Is Cost of Annual Recurring Revenue?

Annual recurring revenue (ARR) is the amount of revenue a business generates from its recurring revenue streams over a year. This includes revenue from subscriptions, maintenance contracts, and other recurring sources. The cost of annual recurring revenue (CARR) is the total cost of acquiring and retaining customers over a year. This includes sales and marketing expenses, customer support costs, and any other costs associated with acquiring and retaining customers.

Calculating CARR is important because it helps businesses understand the true cost of their recurring revenue streams. By understanding the cost of acquiring and retaining customers, businesses can make informed decisions about pricing, marketing, and customer support.

When Is It Valuable To Calculate Cost of Annual Recurring Revenue?

Calculating CARR is valuable for any business that relies on recurring revenue streams. This includes businesses that offer subscriptions, maintenance contracts, and other recurring services. By understanding the cost of acquiring and retaining customers, businesses can make informed decisions about pricing, marketing, and customer support.

Calculating CARR is also valuable for businesses that are looking to grow their recurring revenue streams. By understanding the cost of acquiring and retaining customers, businesses can identify areas where they can reduce costs and improve profitability.

How to Calculate Cost of Annual Recurring Revenue Using Odoo ERP

Odoo ERP is a powerful tool for calculating CARR. Here are the steps to follow:

1. Identify your recurring revenue streams: This includes subscriptions, maintenance contracts, and other recurring sources of revenue.
2. Calculate your annual recurring revenue: This is the total revenue generated from your recurring revenue streams over a year.
3. Identify your customer acquisition costs: This includes sales and marketing expenses associated with acquiring new customers.
4. Identify your customer retention costs: This includes customer support costs and other expenses associated with retaining existing customers.
5. Add your customer acquisition costs and customer retention costs together to get your total cost of acquiring and retaining customers over a year.
6. Divide your total cost of acquiring and retaining customers by your annual recurring revenue to get your cost of annual recurring revenue.

By following these steps, you can calculate your CARR using Odoo ERP. This will help you understand the true cost of your recurring revenue streams and make informed decisions about pricing, marketing, and customer support.

How Do You Calculate Cost of Annual Recurring Revenue in Odoo ERP

Odoo ERP itself isn’t naturally geared towards letting you calculate complex metrics like Cost of Annual Recurring Revenue. As an alternative, teams typically use products like Arithmix to import data from Odoo ERP 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 Odoo ERP, combine it with data from other systems, and create calculations like Cost of Annual Recurring Revenue.

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 Cost of Annual Recurring Revenue in Arithmix

Calculating metrics like Cost of Annual Recurring Revenue is simple in Arithmix. Once you've created your free account, you’ll be able to import your Odoo ERP data, and use it to create natural language formulas for metrics like Cost of Annual Recurring Revenue.

Arithmix is designed to give you the power to build any calculations you want on top of your Odoo ERP 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.