What is ARPA?
Average Revenue per Account is a measure of the revenue generated for each account. In other words, it represents how much money you earn from your customers on average.
A company’s average revenue per account allows for an analysis of the growth at a unit level, which can help investors to identify products that are high or low-revenue generators.
How to Properly Calculate ARPA?
Most subscription-based businesses operate on monthly billing cycles, but quarterly or yearly calculations can also be done, depending on your plans and customer options.
Average Revenue per Account (ARPA) is calculated by dividing MRR by the total number of customers.
New Accounts vs. Existing Accounts
When hiring new salespeople, it is good to measure ARPA for both existing and new customers. This will allow you to see if the different types of accounts have different levels of revenue.
This will give you a sense of how customers are behaving and if they are more willing to accept cross-selling or up-selling.
The formula for calculating your break-even point is the same, but instead of using a single number, you’re going to use two numbers. One represents what it costs per unit, and another represents how many units you need to sell at this price.