# What is ARPU?

> ARPU, average revenue per user, is MRR divided by paying customers. How to calculate it, ARPU vs ARPA, and why it matters for pricing and LTV.

**ARPU (average revenue per user)**: ARPU is the average recurring revenue a business earns per paying customer in a month: MRR divided by paying customers.

ARPU, average revenue per user, is what a paying customer brings in each month on average: MRR divided by the number of paying customers.

## The short definition and formula

**ARPU = MRR / paying customers**

$4,800 MRR from 160 paying customers is an ARPU of $30. Stripe's Billing analytics defines it the same way: total MRR divided by active subscribers, counting a customer with several subscriptions once.

Whether "users" means everyone or only payers depends on who you ask. Consumer apps often divide by all users, including free ones. For a subscription product, divide by paying customers, and say so.

## ARPU, ARPA and ARPPU

- **ARPU**: per user. In SaaS usually per paying customer.
- **ARPA**: per account. Used when one account has many seats, so a team of ten counts once.
- **ARPPU**: per paying user, the explicit version for apps with many free users.

They are the same idea with a different denominator. Pick the one that matches how you charge.

## Why it matters

ARPU is the lever most makers underuse. Growing from 100 to 200 customers takes a lot of marketing. Growing ARPU from $15 to $30 with a better plan structure, yearly plans or a higher tier can take an afternoon and some nerve.

It also feeds the other numbers. [LTV](https://makerhandle.com/glossary/ltv) is ARPU times margin divided by churn, so a higher ARPU raises lifetime value directly. The [MRR calculator](https://makerhandle.com/tools/mrr-calculator) shows revenue per customer for your mix of plans.

## Watch the trend

A falling ARPU while customer count grows usually means discounts, a cheap plan taking over, or bigger customers leaving. A rising one usually means upgrades or a price change sticking. Look at it monthly next to [MRR](https://makerhandle.com/glossary/mrr) and [churn](https://makerhandle.com/glossary/churn-rate). [SaaS metrics for indie hackers](https://makerhandle.com/blog/saas-metrics-for-indie-hackers) puts them all together.

## Sources

- [Stripe docs: Billing analytics metric definitions](https://docs.stripe.com/billing/subscriptions/analytics)

## Questions

### What does ARPU stand for?

Average revenue per user. In SaaS it is usually MRR divided by paying customers.

### How do I calculate ARPU?

Divide MRR by the number of paying customers. $4,800 from 160 customers is $30.

### What is the difference between ARPU and ARPA?

ARPA divides by accounts rather than users, so a ten-seat team counts once. Use it when you charge per seat.

### Should free users count in ARPU?

For a subscription product, usually not. Divide by paying customers and say so. Consumer apps often include everyone.

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Source: https://makerhandle.com/glossary/arpu
makerhandle: makerhandle is a link in bio for makers and founders: every project with its status and revenue verified from Stripe, Paddle and more.