ARPU is the average revenue generated per user over a specific period (usually monthly). Formula: Total Revenue ÷ Total Number of Users. Key metric for SaaS pricing and monetization strategy.
ARPU helps you understand how much each customer is worth on average. Calculate monthly ARPU: Take total monthly revenue, divide by total active users. Example: ₹10L monthly revenue, 500 users → ARPU = ₹2,000/user. Track ARPU trends: Rising ARPU (customers upgrading, better monetization) vs falling ARPU (downgrading, price cuts). Segment ARPU by: Customer type (enterprise vs SMB—enterprise typically 10x higher ARPU), acquisition channel (organic vs paid), cohort (newer users vs old users), geography (US users often 5-10x India ARPU). Increase ARPU through: Add premium tiers, upsells/cross-sells, usage-based pricing, removing free forever plan, annual billing discounts (locks in revenue), better customer success (prevents downgrades). ARPU directly impacts valuation: SaaS valued at 10-20x ARR. Higher ARPU = higher ARR = higher valuation. Warning: Average can be misleading if you have both enterprise (₹1L/month) and freemium (₹0) users—median ARPU might be more useful.
ARPU = Total Monthly Revenue ÷ Total Active UsersARPU ₹649/month (India). Tracks carefully—if ARPU drops (plan downgrades), sign of churn risk or price sensitivity.
Started with ₹500 ARPU (SMB focus). Added enterprise tier, ARPU jumped to ₹2,000 (20% of customers on enterprise plan pull up average). Valuation increased proportionally.
ARPU was ₹50/month (too low to cover ₹5K CAC). Realized pricing was 10x too low. By the time they fixed it, burned all runway.
ARPU determines profitability. If ARPU is ₹500 but CAC is ₹5,000, you need 10+ months to recover acquisition cost. Higher ARPU = lower CAC payback period = healthier business. Investors compare ARPU across companies in your space.
Depends on market. B2C/Consumer SaaS: ₹100-₹1,000/month. B2B SMB: ₹2,000-₹10,000/month. B2B Enterprise: ₹50,000-₹5L+/month. Higher ARPU = easier to build profitable business.
No. Calculate ARPU only for paying customers. Free users are separate metric (conversion rate from free to paid). Mixing them gives misleading average.
Add premium tiers, usage-based pricing, upsells/add-ons, remove generous free plan, better customer success (reduce downgrades), annual billing, target higher-value customers.
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