Growth & SaaS
Monthly recurring revenue (MRR)
Monthly recurring revenue is the predictable subscription revenue a business expects to bill every month, normalized to a monthly amount.
MRR = Sum of monthly subscription charges for all active customers (annual plans ÷ 12)
Worked example
| 180 customers on a $400 a month plan | $72,000 |
| 40 customers on a $1,000 a month plan | $40,000 |
| 5 customers on $24,000 annual contracts | $24,000 ÷ 12 = $2,000 a month each, so $10,000 |
$72,000 + $40,000 + $10,000 = $122,000 MRR
Why it matters
MRR is the baseline a subscription business plans against. Because it moves a little every month, it shows growth, churn and pricing changes long before they add up in annual revenue.
Common mistakes
Where it misleads
Counting one-time fees, such as setup or consulting, which will not repeat next month.
Booking a full annual contract as one month of MRR instead of spreading it over twelve.
Leaving discounts out, so MRR reflects list prices rather than what customers actually pay.
Related terms
Keep reading
- Annual recurring revenue (ARR)Annual recurring revenue is the yearly value of a company’s recurring subscription revenue at a point in time, usually MRR multiplied by twelve.
- Net revenue retention (NRR)Net revenue retention is the share of recurring revenue from existing customers that a business keeps over a period, after upgrades, downgrades and cancellations.
- Customer churn rateCustomer churn rate is the share of customers at the start of a period who cancel or stop paying during it.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.