ARPA is a metric used to measure the average revenue generated from a single customer account. This metric provides a deeper insight into the health and growth of a SaaS business, by showing the revenue generated per account rather than just looking at the total revenue.
ARPA is important for SaaS companies as it helps in understanding the revenue potential of each customer. This metric provides a clear picture of the revenue generated by each account, which helps in identifying areas where the company can improve its revenue generation. It also helps in determining the pricing strategy, customer acquisition costs, and the overall health of the business.
ARPA is calculated by dividing the total revenue by the number of customer accounts. The formula for ARPA is:
ARPA = Total Revenue / Number of Accounts
It’s important to note that the calculation of ARPA should be done over a specific time period, like a month, quarter, or year, to get a meaningful average. This allows the company to track the growth of its ARPA over time and determine if it’s increasing or decreasing.