MRR (Monthly Recurring Revenue)
MRR (Monthly Recurring Revenue)
Monthly Recurring Revenue (MRR) measures the predictable monthly income from subscriptions, providing the foundation for SaaS financial planning and forecasting.
January 24, 2026
Monthly Recurring Revenue (MRR) is the predictable revenue a subscription business expects to receive each month from active subscriptions. For a SaaS company with 500 customers paying $100/month, the MRR is $50,000—representing the baseline revenue to expect next month, barring changes.
MRR serves as the primary metric for subscription business health because it normalizes all recurring revenue to a monthly view, regardless of billing frequency or contract length.
Why MRR Matters
MRR provides the predictability that makes subscription businesses work. Unlike transaction-based businesses where revenue fluctuates with each sale, recurring revenue creates a stable foundation for financial planning, hiring decisions, and growth investments.
Finance teams use MRR for cash flow forecasting. Product teams use it to measure feature adoption impact. Investors use it to value companies—SaaS valuations often start with MRR multiples.
The metric also reveals business health through its components. Growing MRR suggests strong acquisition and retention. Stagnant MRR despite new customers signals churn problems. Declining MRR demands immediate attention.
How to Calculate MRR
The basic formula is straightforward:
For simple pricing, multiply customers by monthly price:
Example: 300 customers at $50/month = $15,000 MRR
Handling Different Billing Frequencies
Annual and quarterly contracts need normalization to monthly values:
Annual contract of $12,000 = $1,000 MRR
Quarterly contract of $3,000 = $1,000 MRR
Only the monthly equivalent counts, not the full payment amount received.
MRR Components
MRR includes all recurring charges:
Base subscription fees
Recurring add-ons and features
Predictable usage charges (if truly recurring)
MRR excludes:
One-time setup fees
Professional services
Hardware or physical goods
Variable usage charges (unless consistently recurring)
Non-subscription revenue
Discounts and promotions reduce MRR by the discount amount. A customer paying $80/month on a $100 plan contributes $80 to MRR.
MRR Movement Types
MRR changes through five distinct channels:
New MRR
Revenue from newly acquired customers. A customer starting at $100/month adds $100 to new MRR.
Expansion MRR
Additional revenue from existing customers through upgrades, add-ons, or increased usage. A customer upgrading from $100 to $150/month generates $50 expansion MRR.
Churned MRR
Revenue lost from canceled subscriptions. A $100/month customer canceling removes $100 from MRR.
Contraction MRR
Revenue lost from downgrades without full cancellation. A customer downgrading from $150 to $100/month creates $50 contraction MRR.
Reactivation MRR
Revenue from previously churned customers returning. A former $100/month customer resubscribing adds $100 reactivation MRR.
The net MRR change combines these movements:
Common Calculation Challenges
Multi-tier Pricing
Calculate MRR separately for each tier, then sum:
200 customers × $30 (basic) = $6,000
100 customers × $100 (pro) = $10,000
20 customers × $500 (enterprise) = $10,000
Total MRR = $26,000
Usage-based Components
Include usage charges in MRR only if they're predictable and recurring. If a customer consistently generates $200/month in usage fees alongside a $100 base subscription, their total MRR contribution is $300.
Highly variable usage doesn't belong in MRR calculations—it creates false predictability.
Multi-currency Operations
Standardize all revenue to a single currency using consistent exchange rates. Track currency fluctuation impact separately from organic MRR growth to understand true business performance.
Free Trials and Pilots
Don't count trial users in MRR until they convert to paying status. A trial converts on Day 15 and pays $100/month—that's when they contribute to MRR, not during the trial period.
Implementation with Billing Systems
Modern billing platforms automate MRR tracking by:
Normalizing different billing frequencies to monthly values
Tracking subscription changes and calculating movement types
Handling proration for mid-cycle upgrades and downgrades
Managing multi-currency conversions
Separating recurring from non-recurring revenue
When implementing MRR tracking with a billing system like Meteroid, ensure your revenue recognition rules align with your business model. Usage-based businesses need careful configuration to distinguish recurring usage from variable spikes.
MRR vs. Related Metrics
MRR vs. ARR
Annual Recurring Revenue (ARR) is MRR multiplied by 12. Both measure the same thing at different time scales. Use MRR for detailed month-to-month analysis and ARR for annual planning and investor communications.
MRR vs. Revenue
Recognized revenue follows accounting standards like ASC 606, which may differ from MRR timing. A $12,000 annual contract paid upfront creates $12,000 in deferred revenue that's recognized monthly, but generates $1,000 MRR immediately.
MRR measures business momentum. Revenue measures what hits the income statement. Both matter for different purposes.
MRR vs. Bookings
Bookings represent contract values signed, including non-recurring components. MRR represents only the recurring monthly portion. A customer signing a $15,000 contract ($12,000 annual subscription + $3,000 setup) creates $12,000 in bookings and $1,000 in MRR.
When MRR Applies
MRR works for businesses with predictable recurring revenue:
SaaS and software subscriptions
Recurring professional services (retainers)
Subscription box services
Membership businesses
Platform fees with recurring charges
MRR doesn't work well for:
Transaction-based businesses
One-time sales models
Highly seasonal subscription patterns
Revenue models without recurring components
Growing MRR Strategically
Sustainable MRR growth comes from three sources: acquisition, expansion, and retention.
Acquisition Efficiency
New MRR must be acquired at costs that allow profitability. Track Customer Acquisition Cost (CAC) against Lifetime Value (LTV) to ensure sustainable growth. Adding $10,000 in new MRR costs more than acquiring it once—it requires ongoing support and success resources.
Expansion Revenue
Existing customers expanding their subscriptions contribute high-margin MRR growth. Product-led expansion happens when customers naturally need more as they succeed—additional user seats, higher usage tiers, or premium features.
Design pricing that scales with customer value. Per-seat pricing grows with team growth. Usage-based pricing grows with product adoption. Feature tiers create natural upgrade paths.
Retention Focus
Protecting existing MRR often matters more than adding new MRR. A company with 5% monthly churn needs substantial new MRR just to maintain current levels. Reducing churn to 2% changes the growth equation entirely.
Track both gross churn (customers leaving) and net revenue retention (including expansion from remaining customers). Businesses with net revenue retention above 100% grow from existing customers even without new acquisition.
Common MRR Mistakes
Mixing recurring and non-recurring revenue: Keep them separate. Including one-time fees inflates MRR and creates false predictability.
Counting annual contracts at full value: A $12,000 annual payment is $1,000 MRR, not $12,000. The full payment creates cash flow but not MRR.
Ignoring contraction: Downgrades often precede cancellations. Track contraction MRR as an early warning signal.
Inconsistent calculation methods: Changing how you calculate MRR breaks trend analysis. Pick a method and stick with it.
Forgetting discounts: Customers on promotional pricing contribute their discounted amount to MRR, not the list price.
Building an MRR Dashboard
Essential MRR metrics to track:
Core MRR Metrics:
Total MRR and month-over-month growth rate
New MRR from acquisition
Expansion MRR from upgrades
Churned MRR from cancellations
Contraction MRR from downgrades
Net new MRR (combined movement)
Supporting Metrics:
ARPU (Average Revenue Per User)
MRR by customer segment or pricing tier
Gross MRR churn rate
Net revenue retention rate
MRR concentration (percentage from top customers)
Segment MRR by acquisition cohort to understand how customer value evolves over time. A cohort showing declining MRR per customer suggests problems with expansion or increasing contraction.
MRR in Financial Operations
Finance teams rely on MRR for several critical functions:
Forecasting: MRR provides the baseline for revenue projections, plus assumptions about new acquisition, expansion, and churn.
Budgeting: Predictable revenue enables confident expense decisions. Growing MRR supports increased hiring and infrastructure investment.
Cash flow planning: Combined with payment terms and collection rates, MRR predicts actual cash receipts.
Valuation: Private SaaS companies are often valued as multiples of MRR or ARR, making it the primary number for fundraising and acquisitions.
Board reporting: MRR growth and its components tell the business health story more clearly than raw revenue numbers.
Technical Implementation Considerations
Implementing accurate MRR tracking requires:
Data sources: Integration with your billing system, CRM, and payment processor to capture all subscription changes.
Calculation timing: Decide whether to recognize MRR changes on contract signature, service start date, or first payment. Consistency matters more than the specific choice.
Historical tracking: Maintain detailed records of all MRR movements to enable cohort analysis and trend identification.
Audit trails: Document why MRR changed for each customer to resolve discrepancies and improve forecasting accuracy.
Revenue recognition alignment: While MRR and recognized revenue differ, they should reconcile through clear rules mapping MRR to revenue recognition timing.
When using a modern billing platform like Meteroid, configure your MRR tracking rules during initial setup to match your business model and ensure consistent calculation across all subscription types and pricing models.