How to calculate ARPU
Divide MRR by the number of paying customers at the same point in time. Use the same rules on both sides: if trials are left out of MRR, leave them out of the customer count too.
Business to business companies often call the same number ARPA, average revenue per account, because one customer account can hold many users. The arithmetic is identical; only the name of the denominator changes. If you price per seat, you can also divide by seats instead of accounts to get revenue per seat.
ARPU = MRR ÷ number of paying customers
Worked example
A business has $3,000 of MRR from 50 paying customers: 40 on a $50 monthly plan and 10 on a $1,200 annual plan, worth $100 a month each. Five more customers are in a free trial.
- MRR
- $3,000
- Paying customers (trials left out)
- 50
- ARPU: $3,000 ÷ 50
- $60
Counting the five trials would give $3,000 ÷ 55 = $54.55 and understate what a paying customer is worth.
Why ARPU matters
ARPU tells you whether growth comes from more customers or from customers paying more. If MRR rises and ARPU stays flat, you are adding customers at the same price. If ARPU climbs, upgrades, add-ons or a price change are doing the work.
It also sets how much you can afford to spend to win a customer. An ARPU of $60 and an ARPU of $600 support very different ways of selling, even at the same MRR.
Common mistakes
- Mixing currencies Dividing dollar MRR by a customer count that includes euro customers understates ARPU. Divide each currency's MRR by the customers billed in that currency.
- Trusting the average when the spread is wide A few large accounts can pull the average far above what a typical customer pays. Look at ARPU per plan, or the median, alongside it.
- Counting free users In a product with a free plan, ARPU over all users and ARPU over paying users are different numbers. Say which one you mean.