How To Calculate Net Annual Recurring Revenue in Deltek Costpoint | Arithmix

Calculating net annual recurring revenue (NARR) is an essential task for any business that wants to understand its financial performance. NARR is a metric that measures the amount of revenue a company can expect to receive from its customers on an annual basis. In this article, we will discuss what NARR is, when it is valuable to calculate it, and how to calculate it.

What Is Net Annual Recurring Revenue?

Net annual recurring revenue (NARR) is a metric that measures the amount of revenue a company can expect to receive from its customers on an annual basis. It is calculated by taking the total revenue generated by a company's recurring revenue streams and subtracting any discounts, refunds, or cancellations. Recurring revenue streams include subscription-based services, maintenance contracts, and other ongoing revenue streams that are expected to continue over time.

NARR is an important metric for businesses because it provides insight into the long-term health of the company's revenue streams. By calculating NARR, businesses can better understand their revenue growth potential and make informed decisions about how to allocate resources and invest in future growth.

When Is It Valuable To Calculate Net Annual Recurring Revenue?

Calculating NARR is valuable for any business that relies on recurring revenue streams. This includes businesses that offer subscription-based services, maintenance contracts, or other ongoing revenue streams. By calculating NARR, businesses can gain insight into the long-term health of their revenue streams and make informed decisions about how to allocate resources and invest in future growth.

For example, if a business has a high NARR, it may be able to invest more resources into customer acquisition and retention, knowing that it has a strong foundation of recurring revenue to build upon. On the other hand, if a business has a low NARR, it may need to focus on improving its customer retention and increasing the value of its recurring revenue streams.

How to Calculate Net Annual Recurring Revenue

Calculating NARR is a relatively simple process. To calculate NARR, follow these steps:

1. Identify all of your recurring revenue streams. This may include subscription-based services, maintenance contracts, and other ongoing revenue streams.
2. Calculate the total revenue generated by these recurring revenue streams over the past year.
3. Subtract any discounts, refunds, or cancellations from this total revenue.
4. Divide the resulting number by the total number of customers who generated this revenue.
5. Multiply this number by the average customer lifespan to get your NARR.

For example, if a business generated $1,000,000 in revenue from recurring revenue streams over the past year, and had $50,000 in discounts, refunds, and cancellations, the total revenue would be $950,000. If this revenue was generated by 500 customers, the revenue per customer would be $1,900. If the average customer lifespan is 2 years, the NARR would be $3,800 ($1,900 x 2).

By calculating NARR, businesses can gain valuable insight into the long-term health of their revenue streams and make informed decisions about how to allocate resources and invest in future growth.

How Do You Calculate Net Annual Recurring Revenue in Deltek Costpoint

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

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

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