Red flag explained · Numbers that disagree
ARR and MRR disagree: which recurring revenue figure is real?
Short answer: ARR should be close to MRR times 12. When the two differ by more than 15%, one is out of date or defined differently, for example contracted revenue against collected revenue. Ask which figure is current and how each is calculated before you use either one to judge the price.
When the checker raises it
Raised as medium severity when stated ARR differs from stated MRR × 12 by more than 15%.
Why it matters
Recurring revenue is the main number buyers pay for in SaaS. Two versions of it in one listing means at least one is wrong for your purposes.
Common causes: ARR taken from a peak month, annual plans counted at full value in one figure and spread monthly in the other, or MRR updated while ARR was not.
A worked example
Composite example, not a real listing
Asking price: $90,000
ARR: $48,000
MRR: $3,100
Average monthly profit: $2,600
Revenue verified via Stripe
Churn: 3% monthly
Business age: 4 years
Owner hours: 6 hours per week
Traffic or revenue sources typed in: Organic search 25%, Direct 45%, Referral 30%.
What the red-flag checker returns: payback of 34.6 months on average monthly profit, and this flag:
Medium ARR and MRR disagree
ARR $48,000 against MRR × 12 = $37,200. One of them is out of date or defined differently.
Ask: Which figure is current, and is ARR a run-rate or contracted revenue?
The same example also raises: Concentration not disclosed.
What to check
- Ask which figure is current, and the date each was measured.
- Ask whether ARR is a run-rate or contracted revenue.
- Check MRR against cash collected in the payment processor for the last three months.
Questions to send the seller
- Which figure is current, and is ARR a run-rate or contracted revenue?
- Is the stated ARR a run-rate or contracted revenue, and which figure is current?
- How many customers pay annually, and how is their payment counted in MRR?
Related flags
Useful next
- SaaS churn stress test
- Free red-flag checker: paste a listing and see which flags it raises.
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The checker is a set of plain rules, not an AI model, and its flags are prompts for questions, not verdicts. Composite examples are invented. Informational screening only, not investment, legal or tax advice.