Monthly recurring revenue (MRR)
Also known as: MRR, monthly recurring revenue, recurring revenue
Monthly recurring revenue (MRR) is the normalised monthly value of all active subscriptions, excluding one-off fees, at a given point in time.
MRR = sum of monthly subscription fees of all active paying customersMRR answers how much predictable revenue the business has right now, per month. It differs from recognised revenue in the accounts: a yearly plan paid upfront adds one twelfth to MRR each month, not the full amount in the month of payment. One-off fees for setup, training or consulting stay out.
Example
A SaaS company starts April with MRR of $120,000. During the month:
- new customers add $9,000;
- upgrades add $4,000 (expansion);
- downgrades remove $1,500 (contraction);
- cancellations remove $3,500 (churned MRR).
End MRR = $120,000 + $9,000 + $4,000 − $1,500 − $3,500 = $128,000.
One April customer signed an annual contract worth $24,000, paid upfront. It adds MRR of $2,000, part of the $9,000. The figures are illustrative.
How to use it
Report MRR as a movement table, not a single number. Net growth of $8,000, for instance, can come from strong sales covering heavy churn, or from modest sales with almost no churn. Those are different businesses. The churned and contraction lines feed churn rate and net revenue retention.
Divide MRR by paying accounts to get ARPU for paying customers and track whether growth comes from more customers or bigger ones.
Common mistakes
- Booking an annual prepayment as MRR in the month it was paid.
- Including setup fees, usage overages that are not contracted, or services revenue.
- Counting signed contracts that have not started billing yet.
- Leaving customers with failed payments in MRR for months instead of setting a clear cut-off.