How To Calculate Cost of ARR in Zoho CRM | Arithmix

Calculating the cost of ARR (Annual Recurring Revenue) is an essential step in determining the profitability of your business. It helps you understand how much revenue you are generating from your customers on an annual basis. By calculating the cost of ARR, you can make informed decisions about pricing, marketing, and sales strategies. In this article, we will discuss what cost of ARR is and when it is valuable to calculate it.

What Is Cost of ARR?

The cost of ARR is the total cost of acquiring and retaining a customer for a year. It includes all the expenses associated with sales and marketing efforts, customer support, and any other costs incurred to keep the customer happy and engaged. The cost of ARR is calculated by dividing the total cost of acquiring and retaining a customer by the annual recurring revenue generated by that customer.

For example, if the total cost of acquiring and retaining a customer is $10,000 and the annual recurring revenue generated by that customer is $20,000, the cost of ARR would be 50% ($10,000/$20,000).

When Is It Valuable To Calculate Cost of ARR?

Calculating the cost of ARR is valuable in several situations. Firstly, it helps you determine the profitability of your business. If the cost of acquiring and retaining a customer is higher than the revenue generated by that customer, your business is not profitable. In this case, you may need to re-evaluate your pricing strategy, marketing efforts, or customer retention programs.

Secondly, calculating the cost of ARR helps you identify the most profitable customers. By analyzing the cost of ARR for each customer, you can determine which customers are generating the most revenue and which ones are costing you more than they are worth. This information can help you focus your sales and marketing efforts on the most profitable customers and develop strategies to retain them.

Finally, calculating the cost of ARR can help you make informed decisions about pricing. By understanding the cost of acquiring and retaining a customer, you can determine the minimum price you need to charge to make a profit. This information can help you set prices that are competitive and profitable.

In conclusion, calculating the cost of ARR is an essential step in determining the profitability of your business. By understanding the cost of acquiring and retaining a customer, you can make informed decisions about pricing, marketing, and sales strategies. Use the formula outlined in this article to calculate the cost of ARR for your business and start making informed decisions today.

How Do You Calculate Cost of ARR in Zoho CRM

Zoho CRM 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 Zoho 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 Zoho CRM, 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 Zoho CRM 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 Zoho 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.