What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is the predictable total revenue generated by your subscription business in a single month. It is the most critical metric for any SaaS (Software as a Service) company because it normalizes your recurring subscription plans (whether monthly, quarterly, or annually) into a single, highly trackable monthly number.
How to Calculate MRR
The simplest way to calculate MRR is using the ARPU (Average Revenue Per User) method.
MRR = Total Active Subscribers × ARPUFor example, if you have 100 paying customers and they each pay you an average of $50 per month, your MRR is $5,000. Our free MRR calculator above automates this math for you.
Why Track MRR?
- Financial Forecasting: Predictable revenue allows you to confidently plan your budget, hire new employees, and scale marketing efforts.
- Performance Tracking: Tracking MRR growth month-over-month is the clearest indicator of whether your product is finding product-market fit.
- Valuation: Investors value SaaS companies based on revenue multiples. Your MRR directly impacts your company's valuation.
Frequently Asked Questions
What is the difference between MRR and ARR?
MRR is your Monthly Recurring Revenue, while ARR is your Annual Recurring Revenue. You can calculate your ARR simply by multiplying your MRR by 12. ARR is typically used by enterprise SaaS companies, while MRR is favored by early-stage and consumer SaaS.
Does MRR include one-time payments?
No. MRR strictly measures recurring revenue. One-time setup fees, consulting services, or non-recurring purchases should be excluded from your MRR calculation to ensure your metrics remain accurate and predictable.
How do upgrades and downgrades affect MRR?
When a customer switches to a higher tier plan, the difference is tracked as Expansion MRR. When they move to a lower tier, it is tracked as Contraction (or Downgrade) MRR. Your total MRR accounts for both of these changes automatically.
What is Net New MRR?
Net New MRR is a metric that shows exactly how much your MRR grew (or shrank) in a given month. It is calculated as: New MRR + Expansion MRR - Contraction MRR - Churned MRR.
Is MRR recognized as standard accounting revenue (GAAP)?
No. MRR is a purely operational metric used by SaaS companies to track momentum and growth. It is not recognized by GAAP (Generally Accepted Accounting Principles) or IFRS. For strict accounting purposes, you must look at recognized revenue.