How To Calculate Net Annual Recurring Revenue in Kinetic | Arithmix

Calculating net annual recurring revenue (NARR) is an important metric for any business that relies on subscription-based revenue streams. NARR provides a clear picture of the revenue generated by a company's subscription-based products or services over a period of time, after accounting for any cancellations or churn. In this article, we'll explore what NARR is, why it's valuable to calculate it, and how to calculate it in Kinetic.

What Is Net Annual Recurring Revenue?

Net Annual Recurring Revenue (NARR) is a metric that measures the recurring revenue generated by a company's subscription-based products or services over a period of time, typically a year. NARR takes into account the revenue generated by new subscriptions, as well as the revenue generated by existing subscriptions that are renewed or upgraded. It also accounts for any cancellations or churn, which is the rate at which customers cancel their subscriptions.

Calculating NARR is important because it provides a clear picture of a company's revenue stream from subscription-based products or services. This metric can be used to track the growth of a company's subscription business, identify areas for improvement, and make data-driven decisions about pricing, marketing, and product development.

When Is It Valuable To Calculate Net Annual Recurring Revenue?

Calculating NARR is valuable for any business that relies on subscription-based revenue streams. This includes software-as-a-service (SaaS) companies, subscription box services, and media companies that offer digital subscriptions. By calculating NARR, these businesses can gain insights into the health of their subscription business and make data-driven decisions about pricing, marketing, and product development.

For example, a SaaS company may use NARR to track the growth of its subscription business and identify areas for improvement. If the company's NARR is declining, it may be a sign that customers are churning at a higher rate than expected. The company could then investigate the reasons for the churn and make changes to its product or pricing strategy to reduce churn and increase NARR.

How to Calculate Net Annual Recurring Revenue in Kinetic

Calculating NARR in Kinetic is a straightforward process. To calculate NARR, you'll need to follow these steps:

1. Identify the total recurring revenue generated by your subscription-based products or services over the past year. This includes revenue generated by new subscriptions, as well as revenue generated by existing subscriptions that were renewed or upgraded.
2. Identify the total revenue lost due to cancellations or churn over the past year.
3. Subtract the revenue lost due to cancellations or churn from the total recurring revenue to get your NARR.

For example, let's say your SaaS company generated $1 million in recurring revenue over the past year. During that same period, you lost $200,000 in revenue due to cancellations or churn. To calculate your NARR, you would subtract $200,000 from $1 million, resulting in a NARR of $800,000.

By calculating NARR in Kinetic, you can gain insights into the health of your subscription business and make data-driven decisions about pricing, marketing, and product development. With this metric, you can identify areas for improvement and take action to increase your NARR and grow your subscription business.

How Do You Calculate Net Annual Recurring Revenue in Kinetic

Kinetic 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 Kinetic 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 Kinetic, 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 Kinetic 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 Kinetic 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.