Monthly Recurring Revenue (MRR)
The predictable revenue a subscription business earns every month from active subscriptions.
Why It Matters
MRR is the foundational metric for subscription businesses, providing a clear view of growth trajectory and financial health.
How It Works
Sum all recurring subscription revenue normalized to a monthly amount. MRR is typically broken into components: new MRR (new customers), expansion MRR (upsells), contraction MRR (downgrades), and churned MRR (cancellations).
Real-World Example
A SaaS company has 500 customers paying $200/month each, giving an MRR of $100,000.
Common Mistakes
Including one-time fees or setup charges in MRR
Not breaking MRR into new, expansion, and churned components
Related Terms
The annualized value of recurring subscription revenue, calculated as MRR multiplied by 12.
The percentage of customers who stop using your product or cancel their subscription in a given period.
The percentage of recurring revenue retained from existing customers after accounting for churn, downgrades, and expansion.
Monthly Recurring Revenue (MRR) FAQs
How do I calculate MRR?
Sum all active subscription amounts normalized to monthly values; annual plans should be divided by 12.
Should I include discounts in MRR?
Yes, calculate MRR based on the actual amount charged after discounts, not the list price.
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