Recurring Payment Stripe: How To Set Up & Manage Subscription Billing
Learn about recurring payments on Stripe: There are various ways to get recurring payments on Stripe. Let's talk about what they are and how to set them up.
Annual Recurring Revenue (ARR) is a critical metric for subscription-based businesses, reflecting the predictable income generated from recurring subscriptions over a year. The subscription economy has experienced significant growth, with subscription businesses growing more than 300% between 2012 and 2018, outpacing the revenue growth of S&P 500 companies during the same period.¹
Understanding ARR is essential for assessing a company's financial health and growth trajectory.
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ARR represents the value of recurring revenue from subscriptions normalized over a year. It excludes one-time payments, professional service fees, and any non-recurring income, providing a clear picture of the steady revenue stream a business can anticipate. This metric is vital for:
ARR is calculated by multiplying the total number of active subscriptions by the average revenue per user (ARPU).
For instance, if a company has 1,000 subscribers each paying $100 annually, the ARR would be $100,000. This calculation provides a straightforward view of the revenue expected from the existing customer base over a year.
For subscription-based models, ARR is a cornerstone metric because it:
While both ARR and Monthly Recurring Revenue (MRR) measure recurring income, they differ in scope:
Businesses may prefer MRR for tracking immediate changes and ARR for strategic, long-term assessments.
To calculate ARR:
For example, with an MRR of $10,000, the ARR would be $120,000 ($10,000 x 12).
Key ARR Metrics and Formulas
Understanding related metrics enhances the analysis of ARR:
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In the SaaS industry, ARR is pivotal for:
Benchmarking Against Industry Standards
Comparing ARR against industry benchmarks helps businesses gauge their performance. For instance, top-performing SaaS companies often achieve year-over-year ARR growth rates exceeding 30%. Understanding these standards aids in setting realistic goals and identifying areas for improvement.
Tracking ARR Trends Over Time
Monitoring ARR over time allows businesses to:
Managing finances in a subscription-based business can be complex, especially when dealing with multiple currencies. Wise Business offers solutions to streamline your financial operations:
Open a Wise Business account online
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can also send money to 160+ countries.
Read the guide on how to open a Wise Business account |
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Sources:
whop.com
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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