ARPU

What it means

ARPU, average revenue per user, is the average revenue per user or customer for a period, usually a month. It is revenue for the period divided by the average number of active customers.

The measure is typical of telecoms, subscription services and SaaS, where a company sells repeatedly to the same customers. Together with the customer count it directly determines MRR, monthly recurring revenue.

Rising ARPU means customers pay more, for example by moving to a higher plan or buying add-ons. A fall may point to discounts, cheaper plans or new customers with smaller needs.

How it works in practice

For an accounting firm with flat monthly fees, ARPU can show average monthly revenue per client. Comparing client types reveals which segments are most valuable.

ARPU is raised through upselling and cross-selling, pricing tiers, add-on services and regular price reviews. It is read alongside churn, since higher prices can increase departures.

ARPU and the average customer lifetime give customer lifetime value, which tells how much it is worth spending to acquire a new client.

What to watch out for

ARPU is an average that can hide large differences. If a few big customers produce most of the revenue, the average looks healthy even though most clients are unprofitable.

The calculation must define clearly who counts as active and whether one-off fees are included. Otherwise the measure changes over time merely because the method changed.