The company has contact with its customers or clients through accounts in which their financial information is mentioned. The more accounts you have, the more the company generates revenue. Accounts will be more only when the company’s products or services are liked by the customer and only then the customer will be in the lead with the company.
For example: Suppose you are an owner of a coca cola company and you have more accounts of your permanent customers so you will generate more revenue from their account and also measure by calculating Average Revenue Per Account.
Meaning of Average Revenue Per Account
Average Revenue per Account refers to ARPA is the way to calculate revenue per account on a monthly or annually basis. It is also known as Average Revenue Per Customer or user. It analyzes the company growth and future growth for improvement because every business needs improvement for attracting more customers towards product or services. Companies can take help from investors, financial advisors to generate revenue for high potential growth.
Method to calculate APRA
APRA: Generated revenue by all customers/ Total Number of customers
The company calculates the revenue, but it is generated by the customers. I will give you the best example, so that you will get this topic completely clear.
If you use You-Tube for any purpose in this, you will see anything like dance channels, music channels, food channels, sports channels and anything else. Everybody has their own subscribers, subscribers means when you like a video on YouTube, then subscribe to it so that you can watch more related videos and always get notifications. So the more subscribers there are, the more the revenue generated. Just like a company’s products will be more attractive so that customers will attract, subscribers will automatically increase.
Analyse companies growth with ARPA
Companies can measure their financial growth with ARPA but analyse their previous and current performance so they find out the company’s revenue by comparing between old and new ARPA, which shows them that the company is going into loss or profit.
Why is ARPA so beneficial?
Average Revenue Per Account is so beneficial for measuring revenue of any kind of business generated by all the customers.
With ARPA, companies used to compare a company’s financial status with old records as well as compare with competitors on subscription based.
The company can find out which types of customers are being attracted towards products or services and may be how much hard work and effort will have to be done for the growth of the company.
The company can compare the previous year’s ARPA with the new ARPA so that they will know about the requirements of resources, customers, anything.
If customers like the company’s products, then they can generate multiple accounts with that company, which will increase the subscribers of that company. The most important thing is that companies can use accounting software for calculating Average Revenue Per Account.