Average Revenue per Account

What is Average Revenue per Account?

An often-used KPI by SaaS companies, the Average Revenue per Account (ARPA) is the amount of revenue generated by each user account, usually on a monthly or annual basis. Besides helping give a good financial overview of your business’ subscription model, ARPA is useful for comparing your subscription cohorts on a regular basis.

Important! A very similar but still distinct metric from ARPA is ARPU, Average Revenue per User. A single user might have more than one account, so the measures of these KPIs will differ accordingly.

Average Revenue per Account is an important KPI for the sales and finance teams in subscription-based companies to monitor.

Why is the Average Revenue per Account important?

ARPA’s importance lies in its providing an overview of a company’s revenue generation at the account level. For this reason, ARPA can serve as a bellwether of a company’s overall profitability.

With its ARPA data, a company can compare its own performance to competitors in the same industry. A company can also use its ARPA findings to discover which demographic or customer segments are the most profitable. Finally, ARPA can be used to forecast revenue growth.

Note, however, that ARPA’s use is limited and even misleading if it isn’t considered alongside other, related KPIs. If your subscription service has an especially wide pricing range, a few large or small accounts will warp your data and give misleading results.

How to calculate Average Revenue per Account

If you’re calculating ARPA on an annual rather than monthly basis, simply substitute ARR for MRR.

How to increase Average Revenue per Account

You can increase ARPA by identifying the most profitable segments of your customer base, and devote increased resources and attention to maximizing your revenue-earning potential among these demographics.

If you pay attention to your competitors’ pricing schemes, you can also modify your own prices to reflect general trends in the market, while of course offering better prices and deals than your competitors.

Finally, ensuring your service or product is optimized on the front end will, of course, go a long way in ensuring it remains popular among your customer base and therefore profitable.

Other KPIs similar to Average Revenue per Account include:

• Sales Conversion Rate
• Customer Acquisition Cost
• Revenue Growth Rate