Topline revenue looks nice on a dashboard. But for a finance team digging for truth, it buries the lead. You need to know exactly how much value you capture from every single customer.
Average revenue per user (ARPU) does exactly that. It validates your pricing strategy and proves product-market fit. It turns abstract growth numbers into unit economics you can actually use.
When you understand ARPU, you forecast with precision. You stop guessing and start planning. This guide covers the formulas, the variants, and the strategy. We also show you how to model it flexibly inside Runway so you stay in control of your numbers.
Defining average revenue per user and key variants
Average revenue per user (ARPU) is simple. It measures the revenue you get from each customer over a set time. This makes it easy to spot trends across customer groups or products and compare performance month to month.
ARPU goes hand-in-hand with metrics like ACV and ARR. ACV tracks annual revenue for a contract. ARR sums up annual revenue across all subscriptions. ARPU drills into what each customer brings in, no matter the contract type.
Businesses use several ARPU variants depending on the model and the question you want to answer. Each version highlights something a little different about how you make money.
Standard ARPU formula
The core ARPU formula:
ARPU = total revenue ÷ total number of users
Always match the period for both numbers. If you’re measuring January revenue, count only users active that month. Don’t mix current user counts with revenue from a period.
Be clear, are you counting all registered users, just the active ones, or only paying users? Active user ARPU usually tells you the most, since those people are really using what you offer.
B2B ARPA for multi-user accounts
B2B SaaS is unique. One company could have 50 people using your software, but you bill the whole account together.
Here, ARPA (average revenue per account) is a better fit. Formula stays the same, but swap users for accounts:
ARPA = total revenue ÷ total number of accounts
You’ll see ARPA come in higher than ARPU when accounts include lots of users. It gives a better picture when your pricing is based on accounts or seats.
Tracking ARPA by tier lets you model growth as accounts add seats or upgrade plans. This is key when you’re forecasting SaaS revenue.
Focusing on paying users with ARPPU
Freemium companies have a challenge. You might have 10,000 users but only 500 pay. Standard ARPU looks low and doesn’t tell the full story.
ARPPU (average revenue per paying user) focuses only on those converting users:
ARPPU = total revenue ÷ number of paying users
ARPPU often runs 2–5x higher than ARPU for freemium businesses. This metric shows the real revenue from customers who move to paid plans.
With ARPPU, you can check your pricing and how well free users turn into paid ones. Watch conversion rates alongside ARPPU to see both acquisition and monetization working in tandem.
Cohort-based ARPU approach
Cohort ARPU looks at revenue from customers who joined at the same time. Tag customers by signup date, then track ARPU for each group as they mature.
For example, check ARPU at 1, 3, 6, and 12 months for customers who started in Q1 2025. Compare that to Q2 2025 cohorts. You’ll see how different groups grow or spend over time.
With Runway’s cohort modeling, build databases for contract value, seats, revenue, or start dates, then roll up consolidated ARPU snapshots by cohort.
Why ARPU is practical in financial analysis
ARPU serves as an essential tool for financial planning because it connects to nearly every major metric you track. It acts as the core input for calculating customer lifetime value (LTV). You find LTV by multiplying ARPU by gross margin and average customer lifespan. You can also derive it by taking that same product of ARPU and gross margin, then dividing by your churn rate.
Revenue forecasting becomes clearer with this metric. If you model adding 1,000 customers with a $50 ARPU, you instantly identify $50,000 in new monthly recurring revenue. ARPU also acts as a signal for your pricing strategy. When the numbers rise, you know customers see value in your product and your pricing works.
You can split new revenue into new clients, expanded accounts, and churned customers by analyzing ARPU data. High, growing numbers combined with low churn show investors your product fits the market and holds real value.
Improving ARPU leads to a better LTV. This boosts your LTV:CAC ratio, which means your customer acquisition costs pay off faster. Modeling with ARPU helps you focus growth efforts exactly where they yield maximum returns.
Main components and considerations when calculating ARPU
Good ARPU analysis starts with proper definitions and clean data. Focus on:
- user or account definition: count users, accounts, or customers based on business model. B2B tracks accounts, consumer apps use users, marketplaces might use active buyers or sellers.
- selecting time period: monthly ARPU fits subscriptions, annual works for longer contracts, and quarterly can balance monthly swings.
- recurring vs. one-time revenue: include only recurring for cleaner trends. Track setup or services revenue elsewhere, so ARPU stays signal-rich.
- handling freemium models: consider both ARPU and ARPPU. Standard ARPU includes all users for big picture monetization. ARPPU zeros in on paying customers for pricing effectiveness.
- usage-based revenue: actual ARPU can move a lot. Try running a smoothed average to find real patterns.
- discounts and refunds: use net revenue. Always subtract discounts, credits, and refunds before dividing.
- multiple products or tiers: calculate ARPU by product line or by plan tier. Overall ARPU can hide shifts, but specifics show which offers drive growth.
Every choice shapes what ARPU reveals. Clear, repeatable definitions help teams track apples-to-apples over time, whether they focus on all customers, product lines, or pricing tiers.
Key benchmarks and common pitfalls
Benchmarks vary by industry, segment, and model. Here are a few useful ranges:
- SMB-focused SaaS: $50 - $500 per month
- mid-market SaaS: $500 - $1,000 per month
- enterprise SaaS: $1,000+ per month
- consumer subscriptions: lower per-user ARPU, higher overall scale
- e-commerce: $50 - $300 annual ARPU
- mobile apps: $5 - $50 per month
Usage-based businesses see ARPU move more. Focus on trends, not one number. Healthy ARPU stays stable or goes up over time.
Define your terms clearly
Distinguish between ARPU, ARPA, and ARPPU since they answer different questions. Pick a specific user group (active, registered, or paying) and use it every time for consistency. It's also important to compare within similar business models because enterprise ARPA and consumer ARPU act as distinct metrics.
Focus on real earnings
Base your math on net revenue. You want to track what you earn after discounts and credits rather than the list price. Separate one-time fees from recurring revenue to keep ARPU trends clear. Decide early how you handle free trial users based on your revenue recognition and stick to that methodology.
Align timing and currency
Match your revenue period to your user count period so your measurements align. If you sell internationally, account for exchange rates. Currency swings impact your ARPU trends when you report in a single currency.
Detailed segmentation
Break down ARPU by plan, cohort, or acquisition channel to highlight high-value groups. If you bundle products, allocate revenue to specific items to track per-product ARPU. Keep new and existing customer ARPU separate so expansion trends don't hide inside your aggregate numbers.
How ARPU relates to other financial metrics
ARPU is a building block for forecasting, reporting, and growth planning.
- raise ARPU, and you raise LTV. That sharpens your LTV:CAC and shows greater sales efficiency.
- decompose growth by splitting new total revenue into new customers, lost customers, and changing ARPU. Spot if growth comes from signing up new clients or getting more value from each one.
- see expansion potential in ARPU trends. If your ARPU goes up over time, you’re landing and expanding well.
- target your highest-value segments. ARPU by industry, company size, or product line points to where you win most often.
- proof of product-market fit. Stable or rising ARPU suggests your offering hits the mark with buyers.
- make your revenue forecasts flexible. Model both user counts and ARPU for robust plans and easy scenario planning.
- show investors how your business stacks up. ARPU benchmarks help communicate pricing power and traction.
How to calculate average revenue per user in Runway
You can build a robust ARPU metric in Runway by connecting your existing revenue and user data. Here is how to set it up step by step.
1. Prepare your data
Start by organizing your Monthly Revenue and Active Users data. You likely already have a revenue recognition database set up with contract values and schedules.
Next, ensure you have a database for your user counts, such as a cohort model or contracts table, that tracks "Active Users" or "Seats" by month.
To make the math work later, check that both databases share a common dimension, such as Customer or Plan. This allows Runway to aggregate and filter your data consistently.
2. Create top-level drivers
Now you need to create the numerator and denominator for your calculation. In your model, add a new number driver called Total Recognized Revenue. Set its forecast formula to sum your revenue column across all customers for each month.
sum(Contracts.Monthly Recognized Revenue)
Create a second number driver called Total Active Users and apply the same logic to sum your seats or active users column using the sum function.
sum(Seats.Active Users)
3. Define the ARPU driver
With your totals ready, add a number driver called ARPU (Monthly) to your table. Set the formula to divide your revenue driver by your user driver. It is best practice to wrap this calculation in an ifError function to prevent errors during months with zero users.
ifError(Total Recognized Revenue / Total Active Users, 0)
If you need to calculate ARPU for specific segments, like Plan or Geography, expand your drivers by that dimension. When calculating inside a database column, use dynamic matching to ensure each row references the correct segment automatically.
4. Display or chart your results
Finally, put your new metric to work. particular a driver table or chart block on a page and include your ARPU (Monthly) driver to monitor trends over time. You can use date ranges and filtering on the block to focus on specific periods or customer segments.
Model your per user revenue the right way
When you track average revenue per user, you see real business health. You validate pricing, forecast smarter, and zero in on what matters most for growth.
Use the ARPU variant that matches your model. ARPA, ARPPU, cohort ARPU. Each answers a different question. Stay consistent with counting, and watch how trends shape decision-making over time.
ARPU helps break down lifetime value, guides your customer acquisition strategy, and clarifies which customers or products grow fastest. That’s what makes it a foundation for clear, connected financial planning.
With Runway, take charge of your models. Connect every metric back to real data. Show your work clearly. Update assumptions and see downstream effects instantly. You’re always in the driver’s seat, no more bottlenecks or outdated numbers.
Want to streamline planning and build metrics that show how your company really works? Get a demo of Runway and start tracking what matters.