ACV and ARPA
ARPA is average revenue per account. The standard reports the whole distribution, because the average describes almost no customer.
Also Average revenue per account · ARPA · Annual contract value · ACV bands
ARPA is total MRR divided by active customers in the month. Because the average alone is nearly always misleading, the standard reports the distribution: per-customer annualized revenue at every decile, and customer counts and revenue by ACV band.
- Formula
ARPA = total MRR ÷ active customers · new-business ARR per logo = new MRR × 12 ÷ new logos · plus the deciles of MRR × 12- Unit
- currency per account
- Bounded
- ≥ 0
- Defaults
- MRR basis · comped excluded · ACV bands 5K / 25K / 100K / 500K (locked)
- Biggest lever
- Band boundaries — redraw the picture without changing a single customer
- Read with
- Concentration · ARR · Growth accounting
- Appears in
- Segmentation · Pricing review · Board deck
- Switches
- 1 · 1 locked — see the choices
What it measures
ARPA — average revenue per account — is the simplest metric here and the most frequently over-read. Its value is not the level but the trend and, above all, the distribution behind it.
Software revenue distributions are almost never symmetric. A book with a handful of large enterprises and a long tail of small accounts produces an average that describes no actual customer: it sits far above the median, and moves when one large customer arrives or leaves. Reporting the average alone invites the reader to imagine a typical customer who does not exist.
Two separate ARPA readings answer different questions:
- Installed-base ARPA — total MRR ÷ active customers. What the average existing relationship is worth.
- New-business ARR per logo — annualized new MRR ÷ new customers in the month. What the business is currently selling.
Their divergence is one of the most informative signals in the report. New business consistently landing above installed-base ARPA means the company is moving upmarket, and the average will rise over time. Consistently below means it is moving down — often invisible in the headline ARPA for a year or more, because the installed base changes slowly.
How it is computed
ARPA, per month: total MRR (comped excluded) ÷ count of customers with MRR above zero. Undefined and reported as such when no customers are active.
New-business ARR per logo, per month: Σ new-movement MRR × 12 ÷ count of new movements. Reported only for months with new business.
Deciles at cutoff. Take each active customer’s MRR × 12, sort ascending, and report the value at each tenth. The p50 is the median customer; the p90/p50 ratio is a compact measure of skew.
ACV bands. Each active customer is placed in a band by annualized revenue, using the configured upper bounds, and both the customer count and the total MRR in each band are reported. The two together are the point: a band holding 70% of customers and 8% of revenue tells a different story from the reverse, and both appear in every real book.
Worked example
Twenty customers, 100,000 total MRR — ARPA 5,000:
| Band (annualized) | Customers | MRR | Share of MRR |
|---|---|---|---|
| < 5K | 8 | 2,000 | 2% |
| 5K–25K | 7 | 8,000 | 8% |
| 25K–100K | 3 | 15,000 | 15% |
| 100K–500K | 2 | 75,000 | 75% |
ARPA is 5,000; the median customer is around 1,000/month. Fifteen of twenty customers — 75% of the logos — produce 10% of the revenue. The average describes none of them.
This is also the concentration picture from a different angle: two customers carry three quarters of the business. Read together with concentration, the two tables agree, which is a useful consistency check.
The choices that change the number
segments.acv_bands. Band boundaries are conventions. Moving them redraws the picture without changing a single customer, so bands should be set once to match how the business actually segments and then left alone.- ARPA on MRR versus total revenue. Computed on MRR here. Including services raises ARPA and makes it lumpier, since services are episodic.
- Active-customer definition. MRR above zero. A customer paused under the reactivation window is carried at held MRR and counts as active — consistent with everything else in the standard, and worth remembering when reconciling against a system that counts differently.
- Annualization of new business. New ARR per logo multiplies a single month of new MRR by twelve. In a business selling multi-year contracts with ramps, this understates the eventual value of a new customer, which committed ARR addresses.
How it is misread
ARPA read as the typical customer. The median and the deciles exist for this reason; in a skewed book they can differ from the mean by an order of magnitude.
ARPA growth read as pricing power. ARPA rises when small customers churn, with no price change and no expansion. Always decompose: is ARPA up because existing customers pay more, or because cheap ones left? The bridge answers it; ARPA alone cannot.
Band migration mistaken for growth. A customer crossing a band boundary changes the band table without changing total revenue.
New-business ARR per logo from a thin month. Two new customers in a month make the figure meaningless. Read the count alongside.
What it cannot tell you
Neither measure carries any information about cost to serve or cost to acquire. A high-ARPA enterprise book with long sales cycles and heavy implementation may be less profitable than a low-ARPA self-serve one. ARPA is a revenue-side measure only, and pairing it with acquisition cost requires data outside the revenue file.
How to state it
A disclosure that travels with the number. Replace the braces; keep the parenthesis.
ARPA {x} · median {y} · p90/p50 {z} (SoF Standard v1.0: MRR basis · comped excluded · bands 5K/25K/100K/500K) Before you quote it
- Median and deciles beside the mean?
- New-business ARR per logo shown separately?
- ARPA movement decomposed with the bridge?
- Bands held constant across periods?
Related questions
- What is the difference between ARPA and ARPU?
- ARPA is revenue per account, the resolved customer; ARPU is per user or seat. In business software the account is the unit that buys, renews and churns, so this standard reports ARPA: total MRR divided by customers with MRR above zero, comped excluded.
- What is the difference between ACV and ARR?
- ACV is the annualized value of one customer's recurring contract; ARR is the sum across all customers. Here ACV bands place each active customer by MRR times twelve, and the bands' customer counts and revenue are reported together.
- Are one-time fees included in ACV?
- No. ACV bands are built on recurring MRR, so implementation and services fees never enter them. Including them raises the apparent contract value and makes it lumpier. A reader who wants the whole contract is asking for TCV, a different number.
- Median or mean?
- Report the distribution. In a skewed book the mean can sit an order of magnitude above the median customer, so the standard reports annualized revenue at every decile and the p90/p50 ratio as a measure of skew, alongside ARPA.
- Why is ARPA rising when nothing changed?
- Because small customers churned. ARPA rises when the tail leaves, with no price change and no expansion. Decompose with the bridge: is ARPA up because existing customers pay more, or because cheap ones left?
- Should new-logo ACV be tracked separately?
- Yes. New-business ARR per logo — annualized new MRR over new customers in the month — shows what the company is currently selling; installed-base ARPA shows what the average existing relationship is worth. Their divergence is the earliest visible sign of a move up- or down-market.
Strategy of Finance. “ACV and ARPA.” SoF Standard Definitions v1.0 (2026-09-18). https://www.strategyoffinance.com/standards/acv-and-arpa/