With so much emphasis on hitting the $1 million in annual recurring revenue (ARR) mark (see The $1 Million Annual Recurring Revenue Milestone and 99% of Tech Startups Never Hit $1 Million in Revenue) it’s important to understand the metrics required. For most SaaS startups, recurring revenue is driven by accounts/customers or seats/users.
Let’s look at a few price points to see how many customers are required for $1 million in ARR ($83,333 in monthly recurring revenue):
- $20/month = 4,166 customers
- $100/month = 833
- $500/month = 167
- $1,000/month = 83
- $3,000/month = 28
How many customers do you have now? What’s your average revenue per customer (sometimes referred to as average revenue per user or ARPU)? How many more customers do you need to hit the major $1 million in ARR milestone?
$1 million in annual recurring revenue is hard to hit, and 99% of tech entrepreneurs never achieve it. Entrepreneurs should know how many customers it’ll take to hit $1 million in ARR based on their average price point.
What else? What are some more thoughts on knowing the number of customers required to hit $1 million in annual recurring revenue?