How To Calculate Cost of ARR in SAP BusinessByDesign | Arithmix

Calculating the cost of ARR (Annual Recurring Revenue) is an important aspect of any business. It helps you understand the revenue generated from your recurring revenue streams and the cost associated with it. By calculating the cost of ARR, you can determine the profitability of your business and make informed decisions about pricing, marketing, and sales strategies.

What Is Cost of ARR?

The cost of ARR is the total cost associated with acquiring and retaining customers who generate recurring revenue for your business. This includes the cost of sales and marketing, customer support, and any other expenses related to maintaining the customer relationship. The cost of ARR is calculated by dividing the total cost by the total ARR generated by the customers.

For example, if you spend $100,000 on sales and marketing and generate $500,000 in ARR, your cost of ARR would be 20% ($100,000/$500,000).

When Is It Valuable To Calculate Cost of ARR?

Calculating the cost of ARR is valuable for businesses that rely on recurring revenue streams, such as subscription-based services or SaaS (Software as a Service) companies. It helps you understand the profitability of your business and identify areas where you can improve efficiency and reduce costs.

By calculating the cost of ARR, you can also determine the lifetime value of your customers and make informed decisions about customer acquisition and retention strategies. For example, if the cost of acquiring a new customer is higher than the lifetime value of that customer, you may need to adjust your pricing or marketing strategies to improve profitability.

In conclusion, calculating the cost of ARR is an important aspect of any business that relies on recurring revenue streams. It helps you understand the profitability of your business, identify areas for improvement, and make informed decisions about pricing, marketing, and sales strategies. By following the steps outlined above, you can easily calculate the cost of ARR for your business and use this information to drive growth and profitability.

How Do You Calculate Cost of ARR in SAP BusinessByDesign

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

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 ARR in Arithmix

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

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