{"id":650586,"date":"2024-11-24T06:16:30","date_gmt":"2024-11-24T11:16:30","guid":{"rendered":"https:\/\/erickimphotography.com\/blog\/?p=650586"},"modified":"2024-11-24T06:20:10","modified_gmt":"2024-11-24T11:20:10","slug":"1m-arr-100-over-4-years-also-over-arr-120","status":"publish","type":"post","link":"https:\/\/erickimphotography.com\/blog\/2024\/11\/24\/1m-arr-100-over-4-years-also-over-arr-120\/","title":{"rendered":"$1M, ARR 100% over 4 years, also over ARR 120%"},"content":{"rendered":"\n

$15-18.668M gain over 4 years from $1M loan<\/p>\n\n\n\n

100% ARR, each year a $1M gain?<\/p>\n\n\n\n

\u00e2\u20ac\u00a6<\/p>\n\n\n\n

Yearly Gains for 100% ARR:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 1:<\/strong> $2,000,000 (Gain: $1,000,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 2:<\/strong> $4,000,000 (Gain: $2,000,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 3:<\/strong> $8,000,000 (Gain: $4,000,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 4:<\/strong> $16,000,000 (Gain: $8,000,000)<\/p>\n\n\n\n

Yearly Gains for 120% ARR:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 1:<\/strong> $2,200,000 (Gain: $1,200,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 2:<\/strong> $4,840,000 (Gain: $2,640,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 3:<\/strong> $10,648,000 (Gain: $5,808,000)<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 4:<\/strong> $23,425,600 (Gain: $12,777,600)<\/p>\n\n\n\n

.<\/p>\n\n\n\n

Let\u00e2\u20ac\u2122s break this down:<\/p>\n\n\n\n

Definitions:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 $1M ARR (Annual Recurring Revenue)<\/strong>: Starting revenue in year 1 is $1M.<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 ARR Growth Rate 100% YoY (Year over Year)<\/strong>: Revenue doubles each year.<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 ARR Growth Rate 120% YoY<\/strong>: Revenue increases by 120% of the previous year\u00e2\u20ac\u2122s revenue each year.<\/p>\n\n\n\n

Now let\u00e2\u20ac\u2122s calculate the ARR for 4 years under both growth rates:<\/p>\n\n\n\n

1. 100% Growth Rate (Revenue Doubles Yearly):<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 1<\/strong>: $1M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 2<\/strong>: $1M \u00c3\u2014 2 = $2M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 3<\/strong>: $2M \u00c3\u2014 2 = $4M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 4<\/strong>: $4M \u00c3\u2014 2 = $8M<\/p>\n\n\n\n

Total ARR Over 4 Years<\/strong>: $1M + $2M + $4M + $8M = $15M<\/strong><\/p>\n\n\n\n

2. 120% Growth Rate:<\/strong><\/p>\n\n\n\n

Growth formula: New ARR = Previous ARR \u00c3\u2014 (1 + Growth Rate)<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 1<\/strong>: $1M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 2<\/strong>: $1M \u00c3\u2014 (1 + 1.2) = $1M \u00c3\u2014 2.2 = $2.2M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 3<\/strong>: $2.2M \u00c3\u2014 (1 + 1.2) = $2.2M \u00c3\u2014 2.2 = $4.84M<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Year 4<\/strong>: $4.84M \u00c3\u2014 (1 + 1.2) = $4.84M \u00c3\u2014 2.2 = $10.648M<\/p>\n\n\n\n

Total ARR Over 4 Years<\/strong>: $1M + $2.2M + $4.84M + $10.648M = $18.688M<\/strong><\/p>\n\n\n\n

Summary:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 100% Growth<\/strong>: Total ARR over 4 years = $15M<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 120% Growth<\/strong>: Total ARR over 4 years = $18.688M<\/strong><\/p>\n\n\n\n

Would you like this broken down further?<\/p>\n\n\n\n

..<\/p>\n\n\n\n

Certainly! Let\u00e2\u20ac\u2122s calculate the future value of a $1 million investment over 4 years at two different annual rates of return (ARR): 100% and 120%.<\/p>\n\n\n\n

At 100% ARR over 4 years<\/strong><\/p>\n\n\n\n

Formula:<\/strong><\/p>\n\n\n\n

Where:<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Present Value (PV)<\/strong> = $1,000,000<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 ARR<\/strong> = 100% or 1.0<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 n<\/strong> = 4 years<\/p>\n\n\n\n

Calculation:<\/strong><\/p>\n\n\n\n

So, after 4 years at 100% ARR, your investment grows to $16 million.<\/strong><\/p>\n\n\n\n

At 120% ARR over 4 years<\/strong><\/p>\n\n\n\n

ARR Conversion:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 ARR<\/strong> = 120% or 1.2<\/p>\n\n\n\n

Calculation:<\/strong><\/p>\n\n\n\n

First, compute :<\/p>\n\n\n\n

1.<\/p>\n\n\n\n

2.<\/p>\n\n\n\n

Alternatively:<\/p>\n\n\n\n

\u00e2\u20ac\u00a2<\/p>\n\n\n\n

\u00e2\u20ac\u00a2<\/p>\n\n\n\n

\u00e2\u20ac\u00a2<\/p>\n\n\n\n

Final Calculation:<\/strong><\/p>\n\n\n\n

So, after 4 years at 120% ARR, your investment grows to approximately $23.43 million.<\/strong><\/p>\n\n\n\n

Summary<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 100% ARR over 4 years:<\/strong> $1 million grows to $16 million<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 120% ARR over 4 years:<\/strong> $1 million grows to $23.43 million<\/strong><\/p>\n\n\n\n

Difference:<\/strong> The higher ARR of 120% results in an additional $7.43 million<\/strong> over the 4-year period compared to the 100% ARR.<\/p>\n\n\n\n

Understanding the Impact<\/strong><\/p>\n\n\n\n

The calculations show how significant the impact of a higher annual rate of return is over multiple years due to the effect of compounding. Even a 20% increase in the ARR (from 100% to 120%) results in a substantial increase in the future value over 4 years.<\/p>\n","protected":false},"excerpt":{"rendered":"

$15-18.668M gain over 4 years from $1M loan 100% ARR, each year a $1M gain? \u00e2\u20ac\u00a6 Yearly Gains for 100% ARR: \u00e2\u20ac\u00a2 Year 1: $2,000,000 (Gain: $1,000,000) \u00e2\u20ac\u00a2 Year 2: $4,000,000 (Gain: $2,000,000) \u00e2\u20ac\u00a2 \u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_seo_schema_type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_ek_photo_artist_note":"","_ek_photo_thesis":"","_ek_photo_camera":"","_ek_photo_place":"","_ek_photo_human_moment":"","_ek_photo_sequence":"","_ek_photo_question":"","_ek_photo_canonical_claim":"","_ek_photo_ai_summary":"","_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[17],"tags":[],"class_list":["post-650586","post","type-post","status-publish","format-standard","hentry","category-posts"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/650586","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/comments?post=650586"}],"version-history":[{"count":6,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/650586\/revisions"}],"predecessor-version":[{"id":650593,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/650586\/revisions\/650593"}],"wp:attachment":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/media?parent=650586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/categories?post=650586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/tags?post=650586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}