one-line definition
ARPU is a core operating metric that helps small teams make better product and growth decisions.
formula: ARPU = Total revenue ÷ Number of active users
tl;dr
ARPU measures the average revenue per user per month. It tells you whether you're extracting more value over time or just adding cheap accounts.
Simple definition
ARPU (Average Revenue Per User) is your total revenue divided by your number of active users in a given period. It answers a simple question: on average, how much is each user worth to you right now?
ARPU is different from LTV. LTV is a lifetime projection. ARPU is a snapshot of the current month. If your ARPU is rising, it means users are upgrading, buying add-ons, or your pricing changes are working. If it's falling, you might be attracting lower-value users or losing your power users.
How to calculate it
ARPU = Total revenue / Number of active users
Say your SaaS made $7,200 last month and you had 180 active users:
ARPU = $7,200 / 180 = $40
Now segment it. If your Pro plan users (50 people) generate $4,500 and your Basic users (130 people) generate $2,700:
- Pro ARPU = $4,500 / 50 = $90
- Basic ARPU = $2,700 / 130 = $20.77
That tells you Pro users are worth 4.3x more. Spend your time building features that get Basic users to upgrade.
Example
You run a scheduling tool with a $19/month Starter plan and a $59/month Growth plan. Your blended ARPU is $31. You ship a team collaboration feature gated to the Growth plan. Over two months, 20% of Starter users upgrade. Your ARPU moves from $31 to $39 -- a 26% increase with zero new signups. ARPU growth from expansion is cheaper than ARPU growth from acquisition because there's no CAC attached.
Related reading
Related terms
- MRR
- CAC
- LTV
FAQ
Why does ARPU matter?+
It gives a fast signal about whether your product and distribution system is improving or regressing.