Monthly Recurring Revenue (MRR)
The ultimate baseline metric for subscription and SaaS business health.
Monthly Recurring Revenue (MRR) is the single most critical metric for any subscription or SaaS company. It represents the normalized, predictable revenue that a business expects to receive every single month.
By filtering out one-time fees (like consulting or installation costs), MRR gives business owners and investors an accurate view of core growth trajectory and operational stability.
Key Takeaways
- •Predictability: MRR shows core revenue stability, allowing for confident planning.
- •Compounding Growth: Growth is driven by accumulating new subscriptions month-over-month.
- •Valuation Driver: Investors value SaaS companies primarily on their recurring revenue bases.
Core Concepts & Definitions
1The Components of MRR
MRR changes are broken down into specific buckets to understand customer behavior.
•New MRR: Added by brand new customers.
•Expansion MRR: Added by existing customers upgrading their plans.
•Churned MRR: Lost when customers cancel their subscriptions.
2Net New MRR
The net change in monthly recurring revenue, showing if the company is growing or shrinking.
•Formula: New MRR + Expansion MRR - Churned MRR.
•Positive Net New MRR indicates healthy organic growth.
Equations & Calculation Methods
Net New MRR Formula
Measures the net monthly change in recurring revenue after factoring in additions, upgrades, and cancellations.
Step-by-Step Worked Examples
Example 1: Calculating Net New MRR
Problem: A SaaS company starts the month with $100,000 MRR. In that month, they add 10 new customers at $200/mo, 5 existing customers upgrade by $50/mo, and 3 customers cancel their $300/mo plans. What is the Net New MRR?
Step-by-step Solution:
- 1Calculate New MRR: 10 * $200 = $2,000.
- 2Calculate Expansion MRR: 5 * $50 = $250.
- 3Calculate Churned MRR: 3 * $300 = $900.
- 4Apply Net New MRR formula: $2,000 (New) + $250 (Expansion) - $900 (Churned) = $1,350.
Topic FAQ
No. One-time setup fees do not recur monthly and should be excluded from MRR calculations to avoid artificially inflating predictable revenue metrics.
SaaS MRR Growth Planner
Model your monthly recurring revenue growth rates and custom churn rates.
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Calculated Results
12-Month SaaS MRR Growth Curve
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Frequently Asked Questions
No. One-time setup fees do not recur monthly and should be excluded from MRR calculations to avoid artificially inflating predictable revenue metrics.