Revenue metric
ARPU (Average Revenue Per User)
Average Revenue Per User (ARPU) measures the typical monthly revenue from each paying customer. For B2B SaaS with multi-seat accounts, ARPA (Average Revenue Per Account) is the more common variant. Both are sensitive to outliers — median revenue is often the more honest indicator at small scale.
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Formula
ARPU = MRR / paying customer count
Where:
- MRR = Monthly Recurring Revenue.
- paying customer count = Number of unique paying customers at the time of measurement.
Worked example
MRR is $4,221, customer count is 100. ARPU = $4,221 / 100 = $42.21. If one of those customers is a $999/month enterprise account, the median is closer to $30, so the average is inflated by the outlier.
What it tells you
- The typical economic value of one customer.
- Whether the customer mix is moving up-market or down-market over time.
- Together with churn, the basis for LTV.
What it does NOT tell you
- Distribution of revenue. ARPU averages over outliers; one whale customer can inflate it.
- Quality of revenue. Two customers at $50 ARPU each have the same ARPU as one at $100 but very different concentration risk.
- Customer-acquisition-channel-mix effect on ARPU.
Common miscalculations
- Reporting ARPU on small samples (under 20 customers). Median is more honest at small scale.
- Mixing one-time customers with subscription customers. ARPU is a recurring metric.
- Reporting ARPU without distribution context (median, percentiles). Average alone hides the shape.
Frequently asked
- Should I report ARPU or median revenue?
- Both. Average for external benchmarking; median for understanding the typical customer's economic value, especially when whales distort the mean.
More revenue metrics
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