Average Revenue Per User (ARPU)

Average Revenue Per User (ARPU) measures the average monthly revenue generated per customer or user. ARPU is a key metric for subscription businesses and SaaS companies, providing insight into customer value, pricing effectiveness, and revenue optimization opportunities. It helps companies understand how much revenue each customer contributes and identify opportunities for expansion.

ARPU is calculated using the formula: ARPU = Total Revenue ÷ Number of Paying Customers

For example, if a company has $100,000 MRR and 500 customers, their ARPU is $200 per month.

ARPU can be calculated for different time periods:

• Monthly ARPU: Average revenue per customer per month
• Annual ARPU: Average revenue per customer per year (MRR × 12)
• Trailing ARPU: Average over the last 12 months

ARPU components include:

• Base subscription: Core product or service pricing
• Add-on features: Additional modules or premium features
• Usage charges: Metered billing for consumption-based services
• Seat licensing: Per-user pricing for multi-user products
• Professional services: Ongoing consulting or support fees

ARPU directly impacts critical business metrics:

• Total revenue: ARPU × customer count = total MRR
• Customer lifetime value: Higher ARPU increases LTV significantly
• Unit economics: Must balance ARPU with customer acquisition costs
• Growth potential: Higher ARPU reduces dependency on customer count growth

For SaaS businesses, increasing ARPU is often more profitable than acquiring new customers, as it requires no customer acquisition costs and leverages existing customer relationships. Companies should focus on both expanding ARPU within existing customers and acquiring customers with higher ARPU potential.