Average Revenue Per User (ARPU)

Average Revenue Per User (ARPU) is the recurring revenue generated per active subscriber. The formula is: ARPU = MRR / Total Active Subscribers. If a company has $500,000 in MRR and 5,000 active customers, the ARPU is $100/month. ARPU can also be expressed annually (sometimes called ARPA — Average Revenue Per Account).

ARPU is a useful barometer for pricing health and expansion efficiency. A rising ARPU over time indicates that the business is successfully moving customers to higher-value plans, adding seats, or cross-selling additional features. A declining ARPU might signal that new customers are adopting lower-tier plans or that existing customers are downgrading.

ARPU should be analyzed in segments rather than only as a blended average. Enterprise ARPU and SMB ARPU may differ by 10x or more, and blending them into a single number can obscure important trends. Tracking ARPU by cohort (the month customers joined) reveals whether the business is improving its ability to sell higher-value plans over time.

There is a related metric called ARPPU (Average Revenue Per Paying User) that excludes free-tier users. For businesses with a freemium model, the distinction is important. If a company has 10,000 users but only 2,000 are paying, ARPU based on all users is much lower than ARPPU based on paying users. ARPPU more accurately reflects the monetization of converted users.

Payment failures can distort ARPU calculations if failed subscribers are still counted as "active." LostChurn provides clear visibility into which customers are in active recovery versus truly active, helping ensure your ARPU metrics reflect reality rather than inflated subscriber counts.