What is the difference between ARR and ACV?

ACV is the annual value of one contract. ARR is the annual value of all active recurring contracts combined.

How do I turn an ARR target into an outbound plan?

Divide the target by average ACV to get customers needed, then work back through win rate and conversation-to-opportunity rate to find how many qualified conversations and profiles you need.

Metrics

Annual Recurring Revenue (ARR)

The predictable yearly revenue from active subscriptions or retainers.

What is annual recurring revenue?

ARR is the yearly value of revenue you can reasonably expect to repeat: subscriptions, retainers, and contracted support. One-off project fees, hardware, and professional services are excluded.

Working backwards from an ARR target

This is the calculation most teams skip.

// ARR TARGET TO OUTBOUND ACTIVITY
target_new_arr: 600,000
average_acv: 30,000
customers_needed: 20
win_rate_from_opportunity: 25%
opportunities_needed: 80
qualified_conversations_needed: ~240
profiles_required_at_15_per_month: 2 profiles over 8 months

Once you write it out, the question stops being "is outbound worth it" and becomes "do I have enough capacity to hit the number."

ARR for dev agencies

Agencies usually run on project revenue, which makes forecasting brutal. Tracking retained ARR separately, from support contracts and rolling capacity agreements, shows you which part of the business is actually stable.

The number that ruins ARR plans

Churn. Adding 600,000 of new ARR while losing 400,000 is a 200,000 year. Retention decides whether outbound compounds or just replaces losses.

Related reading: Annual Contract Value and Pipeline Coverage Ratio.

Frequently Asked Questions

What is the difference between ARR and ACV?: ACV is the annual value of one contract. ARR is the annual value of all active recurring contracts combined.
How do I turn an ARR target into an outbound plan?: Divide the target by average ACV to get customers needed, then work back through win rate and conversation-to-opportunity rate to find how many qualified conversations and profiles you need.