Revenue Metrics
Monthly Recurring Revenue (MRR)
The predictable revenue a subscription business expects to collect every month from active customers.
MRR is the single most-watched number in subscription businesses because it turns lumpy, unpredictable sales into a steady, forecastable signal. Unlike one-time revenue, MRR captures only the normalised, recurring portion of what customers pay — so annual plans are divided by twelve, and one-time fees are excluded entirely. Founders and investors use MRR to gauge the health of the revenue engine right now, not last quarter. It decomposes naturally into new MRR (fresh customers), expansion MRR (upgrades), contraction MRR (downgrades), and churned MRR (cancellations), making it a live dashboard of growth and leakage simultaneously. Most business decisions — hiring, ad spend, product bets — become far cleaner once MRR is reliable and well-segmented.
FORMULA
MRR = Number of Active Customers × Average Revenue Per Customer Per Month
EXAMPLE
A tool with 200 customers paying $50 per month and 10 customers on a $1,200 annual plan has MRR of (200 × $50) + (10 × $100) = $11,000.
Frequently asked questions
What is the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) measures normalised recurring revenue per month; ARR (Annual Recurring Revenue) is simply MRR multiplied by 12. MRR is used for month-to-month operational tracking, while ARR is the headline number used for board reporting and fundraising.
Should one-time fees be included in MRR?
No. MRR includes only normalised recurring subscription revenue. One-time setup fees, professional services, and variable usage charges are excluded because they are not predictable month over month. Annual plans are divided by 12 to contribute their monthly-equivalent amount.
What counts as good MRR growth for an early-stage SaaS?
Early-stage SaaS companies often target 10–20% month-over-month MRR growth, though this naturally slows as the revenue base grows. What matters more than the headline rate is the composition: healthy growth is driven by new plus expansion MRR outpacing contraction and churned MRR.
RELATED TERMS