Average revenue per user / Average revenue per account (ARPU / ARPA)

The average revenue per user is all revenue coming in from active users divided by the total number of customers that revenue came from, measured monthly or annually. The metrics are mainly used in subscription models to see the business’s profitability and financial stability. The higher your ARPU, the better. The terms ARPU and ARPA are often used interchangeably. Depending on your business model, this might not be correct all the time. For example, one customer is tracked as a single user but can have multiple accounts simultaneously. In case your business model allows customers to have various accounts, calculate both metrics. Since the user base of SaaS companies fluctuate heavily, using cohorts to find trends and see which customer segment brings the most revenue is essential to build a stable user base. Your goal should be to consistently increase ARPU, for example, by increasing your prices or motivating people to upgrade to higher plans.

How to calculate ARPU

To calculate ARPU, divide the total revenue for a given period of time by the number of average users.

ARPU = Total revenue in a month / Average users in a month.

For example, if you have 200 customers and your company is generating €20.000 in revenue per month, your ARPU is €100. (€20.000 / 200 = €100).

How to improve ARPU

• Incentivize people to upgrade to higher plans
• Make upgrading to higher plans easy
• Increase your prices
• Improve and expand your service
• Focus on expansion revenue through up-sells and cross-sells
• Experiment with pricing plans

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