ARR Leakage
ARR leakage is the difference between a SaaS company's expected Annual Recurring Revenue (based on active subscriptions and contracted rates) and the revenue actually collected, caused by billing errors, payment failures, and pricing gaps.
ARR leakage is particularly impactful because SaaS valuations are directly tied to ARR multiples. At a 7x revenue multiple (typical for growth-stage SaaS), every $1 of leaked ARR destroys $7 of company valuation.
For a $10M ARR company with 3% leakage ($300K), the valuation impact is $2.1M. Fixing the leakage doesn't just recover $300K in annual revenue — it adds $2.1M in enterprise value. This makes revenue leakage detection one of the highest-ROI investments a SaaS company can make.
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Further Reading
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