For subscription businesses, the most important top-line metric. MRR cuts through the noise of one-time payments, upgrade timing, and billing cycles to tell you what the business is actually generating in predictable monthly revenue.

Definition

MRR (Monthly Recurring Revenue) - the total subscription revenue your business can expect to collect in a normalized month, calculated by summing every active subscription expressed as a monthly amount.

Formula
MRR = Sum of (every active subscription, expressed as monthly revenue)

Normalize: monthly plan = full amount; quarterly ÷ 3; annual ÷ 12.

Net New MRR = New + Expansion − Contraction − Churned

Common uses

  • Subscription business health - the primary growth metric for SaaS and recurring-revenue businesses
  • Forecasting - the foundation of every subscription revenue projection
  • Component analysis- breaking into New, Expansion, Contraction, Churned reveals what's driving growth
  • Investor reporting - the standard metric private investors and acquirers ask for

Watch out

Don't include one-time fees in MRR - it inflates the number and misleads. Track those separately.

MRR isn't cash. A $12K annual contract paid upfront is $1K of MRR per month, but $12K of cash in month 1 and $0 for months 2-12. Plan accordingly.

For the full explanation, see What Is Monthly Recurring Revenue (MRR)?

Related terms