Average revenue per user (ARPU) is the total revenue divided by the number of active users or accounts over a given period. It measures the revenue generated per customer and is a key input to LTV calculations, pricing analysis, and revenue forecasting for subscription and platform businesses.
Formula
ARPU = Total Revenue / Number of Active UsersIn Depth
ARPU distils the revenue model into its simplest form: how much does each customer pay? Tracking ARPU over time reveals pricing power, the effectiveness of upselling strategies, and shifts in customer mix.
The formula is: ARPU = Total Revenue / Number of Active Users (or Accounts). For SaaS businesses, this is often expressed as monthly ARPU (MRR / customers) or annual ARPU (ARR / customers).
ARPU changes are driven by pricing actions (raising or lowering prices), product mix shifts (customers moving to higher or lower tiers), upselling success (expanding usage within accounts), and customer mix changes (adding enterprise vs SMB customers).
FP&A teams should analyse ARPU by segment — enterprise, mid-market, SMB — because blended ARPU can be misleading. A company might show rising ARPU simply because it is acquiring more enterprise customers, while SMB ARPU is actually declining.
For UK SaaS companies, ARPU benchmarks vary dramatically by market segment. B2B enterprise SaaS may see ARPU of £2,000-£50,000+/month. Mid-market B2B ranges from £500-£2,000. SMB products typically run £30-£200/month. Consumer subscriptions are usually below £20/month.
Real-World Example
A UK SaaS company has 450 customers generating £360K MRR. ARPU is £800/month. Segmenting reveals: 50 enterprise customers average £3,200/month (56% of MRR), 150 mid-market average £640/month (27% of MRR), and 250 SMB average £245/month (17% of MRR). The FP&A team models that shifting resources towards enterprise acquisition would increase blended ARPU but slow customer count growth.
Related Terms
Monthly recurring revenue (MRR) is the predictable, normalised revenue a subscription business earns...
Customer acquisition cost (CAC) is the total cost of acquiring a new customer, including all sales a...
Customer lifetime value (LTV or CLV) is the total revenue a company expects to earn from a customer ...
Unit economics is the analysis of revenue and costs associated with a single unit of a business mode...
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