What is Average Revenue Per Account (ARPA)?
ARPA or ARPU is a metric that measures the average revenue earned per account or user within a specific time period. It helps to determine the average revenue generated from each individual account or user.
ARPA in Professional Service Automation (PSA) displays the financial health of a service-based business. It does this by showing the average revenue generated by each client or project.
Importance of ARPA
Understanding ARPA is crucial for service-based businesses, especially those utilizing Professional Service Automation (PSA) software. Here’s why:
1. Client Value Assessment: ARPA helps businesses determine the value of each client, guiding decisions on resource allocation and client retention strategies.
2. Financial Forecasting: By tracking ARPA, companies can make informed predictions about future revenue, aiding in budgeting and financial planning.
3. Performance Metrics: ARPA serves as a benchmark to measure the effectiveness of sales, marketing, and service delivery strategies.
Why Average Revenue Per Account is so important?
ARPA = Total Revenue in a Period / Number of Accounts in the Same Period
Imagine a PSA business using KEBS finance management software recorded a total revenue of $100,000 in January from 50 accounts.
ARPA = $100,000/50= $2,000
This means, on average, each account generated $2,000 in January.
ARPA vs Other Metrics
1. ARPA vs MRR (Monthly Recurring Revenue): While ARPA measures the average revenue per account, MRR focuses on the recurring revenue a company can expect every month. MRR is especially crucial for businesses with subscription-based models.
2. ARPA vs ARR (Annual Recurring Revenue): ARR is the annualized version of MRR. While ARPA gives insights on a per-account basis, ARR provides a broader view of the company’s yearly recurring revenue.
3. ARPA vs LTV (Lifetime Value): LTV estimates the total revenue a business can expect from a single customer account over its lifetime. ARPA, on the other hand, focuses on a specific period.
|Application in PSA
|Average Revenue Per Account (ARPA)
|Average revenue generated per account over a specific time period.
|Used to measure revenue from each client or account, helping businesses understand client value and forecast future revenue.
|Average Revenue Per User (ARPU)
|Average revenue generated per user over a specific time period.
|Can be useful in PSA scenarios where services are user-centric, like SaaS models or per-user licensing.
|The percentage of billable hours to total working hours.
|Helps PSA businesses gauge how effectively they are utilizing their workforce and how much time is spent on billable work.
Utilizing ARPA in Business
ARPA is not just a metric to be observed; it’s a tool to be utilized:
1. Pricing Strategy: If ARPA is lower than expected, businesses might consider revising their pricing models or upselling additional services.
2. Resource Allocation: Companies can prioritize high ARPA clients, ensuring they receive the best resources and services. Tools like KEBS resource management software can assist in this process.
3. Client Retention: A declining ARPA might indicate dissatisfaction among clients. Businesses can use ticket management systems to address client concerns promptly.
Ready to Optimize ARPA?
KEBS, a leading PSA software, offers tools that can help businesses optimize their ARPA:
- Financial Management: With KEBS finance tools, businesses can track revenue streams, ensuring accurate ARPA calculations.
- Project Management: Using KEBS project management features, companies can ensure projects stay on track and within budget, positively impacting ARPA.
- Resource Management: Allocate resources effectively with KEBS resource management solutions, ensuring high ARPA clients receive the attention they deserve.
- Deal Management: Boost sales and increase ARPA with KEBS deal management capabilities.
Ready to optimize your ARPA and drive your business forward? Contact us today or request a demo to see KEBS in action!