MRR (Monthly Recurring Revenue)
The predictable recurring revenue a subscription business generates each month.
MRR is the monthly equivalent of ARR — the normalized recurring revenue a company can expect to collect this month from active subscriptions, regardless of actual billing cycle (annual contracts are divided by 12 to get their monthly contribution). It's the standard operating metric earlier-stage SaaS companies track week to week and month to month.
MRR is typically broken into components for deeper analysis: new MRR (from new customers), expansion MRR (existing customers upgrading), contraction MRR (existing customers downgrading), and churned MRR (canceled customers) — together these explain exactly why total MRR moved the way it did in a given month.
MRR = ARR / 12, or sum of all active subscriptions' monthly-equivalent valueA company has 200 customers on a $250/month plan and 50 customers on a $3,000/year plan (equivalent to $250/month). Total MRR = (200 x $250) + (50 x $250) = $62,500.
Track your MRR waterfall (new, expansion, contraction, churn) monthly, not just the net total — the net number can look fine while masking a churn problem that expansion revenue is temporarily covering up.
How is MRR different from cash collected in a month?
MRR normalizes recurring revenue to a monthly run-rate regardless of billing frequency, while cash collected reflects actual invoicing and payment timing — a company billing annually can collect a full year's cash upfront while MRR still only counts 1/12th of that contract per month.
Related terms
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