What is ARPU?
Average Revenue Per User (ARPU) tells you how much revenue each customer generates on average. It's a fundamental metric for understanding your pricing power and customer value distribution.
ARPU is often used interchangeably with ARPA (Average Revenue Per Account), though ARPU typically counts individual users while ARPA counts company accounts. For B2B SaaS, ARPA is usually more relevant.
Why ARPU Matters
ARPU directly impacts your unit economics. Higher ARPU means you can afford higher CAC, which opens up more acquisition channels. It also affects your market positioning: low ARPU suggests SMB focus, high ARPU indicates enterprise sales.
Tracking ARPU over time reveals pricing health. Rising ARPU indicates successful upselling or pricing optimization. Falling ARPU might signal market pressure or customer mix shift toward smaller accounts.
How to Increase ARPU
Add premium tiers with advanced features. Implement usage-based pricing that scales with customer success. Bundle complementary products. Move upmarket to larger accounts. Reduce discounting.
ARPU = Total Revenue ÷ Total Active Users
Monthly ARPU = MRR ÷ Total Customers
Annual ARPU = ARR ÷ Total Customers
Your SaaS metrics:
- Total MRR: $150,000
- Total active customers: 500
ARPU = $150,000 ÷ 500 = $300/month
If your CAC is $900 and customers stay 24 months on average, your LTV is $7,200 with an LTV:CAC ratio of 8:1. Strong economics.