What Is MRR?
MRR (Monthly Recurring Revenue) is the normalized monthly subscription revenue from all active customers — the core financial metric for any SaaS business.
MRR is the predictable revenue your SaaS generates each month from active subscriptions. Unlike one-time sales, MRR is recurring — it compounds when you grow and declines when customers churn.
How to calculate MRR:
MRR = Sum of all active subscription monthly fees
Example:
- 20 customers on $49/month = $980
- 5 customers on $149/month = $745
- Total MRR = $1,725
For annual subscriptions, normalize to monthly: $1,200/year = $100 MRR.
MRR components:
- New MRR — revenue from new customers acquired this month
- Expansion MRR — upgrades and additional seats from existing customers
- Contraction MRR — downgrades from existing customers
- Churned MRR — revenue lost to cancellations
- Net New MRR = New + Expansion − Contraction − Churned
Why MRR matters more than total revenue: MRR predicts the future. $100k in one-time consulting revenue tells you nothing about next month. $10k MRR tells you you'll have at least $10k next month, and probably more if you're growing.
ARR: Annual Recurring Revenue = MRR × 12. Used at larger scale ($1M+ ARR) as the headline metric for investor conversations and benchmarking.
MRR in practice: Track New MRR, Churned MRR, and Net New MRR weekly. If Churned MRR > New MRR, your revenue is declining regardless of how many new signups you're generating.