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SaaS

What is Monthly Recurring Revenue (MRR)?

Monthly Recurring Revenue (MRR) represents predictable revenue generated each month from subscriptions. It helps track consistent business growth.

Full FormMonthly Recurring Revenue
CategorySaaS
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FORMULA

How to Calculate Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) represents predictable monthly income from subscriptions, helping track consistent revenue growth. This metric is critical for SaaS businesses, and mRR supports forecasting and planning. Growth indicates healthy customer acquisition.

Monthly Recurring Revenue (MRR) Formula
Monthly Recurring Revenue (MRR)=
Total Active Subscribers × Average Revenue Per User

Simple Example

If you had 1,200 subscribers paying $25 monthly:

MRR = 1,200 × 25 = 30,000
1,200
Users
$25
$30,000
MRR

Marketing Platforms that supports Monthly Recurring Revenue (MRR)

These platforms provide the data needed to measure or calculate Monthly Recurring Revenue (MRR) in Two Minute Reports.

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Frequently Asked Questions

Monthly Recurring Revenue (MRR) measures predictable, recurring revenue normalized to a monthly amount from subscriptions. Calculate it by summing all monthly subscription fees or annualizing annual contracts (divide by 12). If you have 100 customers paying $50/month and 20 paying $600/year, MRR is $6,000 ($5,000 + $1,000). MRR is critical for SaaS businesses because it provides predictable revenue forecasts, enables consistent growth tracking, facilitates investor valuation, and allows accurate resource planning. Unlike one-time revenue that fluctuates, MRR creates stable financial foundation. Tracking MRR movements—new, expansion, contraction, and churned MRR—reveals business health and growth sustainability.
MRR breaks down into several categories revealing growth drivers and challenges. New MRR: revenue from newly acquired customers. Expansion MRR: additional revenue from existing customers through upgrades, add-ons, or increased usage. Contraction MRR: revenue lost from downgrades or reduced usage (negative impact). Churned MRR: revenue lost from canceled subscriptions (negative impact). Reactivation MRR: revenue from previously churned customers who return. Net New MRR combines all these: (New + Expansion + Reactivation) - (Contraction + Churned). Healthy SaaS companies maximize New and Expansion MRR while minimizing Contraction and Churn. Tracking these components separately reveals whether growth comes from new customer acquisition, existing customer expansion, or both—crucial for strategic resource allocation.
MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) measure the same recurring revenue concept on different timescales. MRR normalizes all subscriptions to monthly amounts, while ARR multiplies MRR by 12 to annualize it (ARR = MRR × 12). Use MRR when monthly changes are significant—fast-growing companies, high-churn environments, or businesses with predominantly monthly billing. Use ARR for strategic planning, investor communications, and when most customers have annual contracts. Some companies track both. ARR is common for B2B SaaS with annual contracts, while B2C subscriptions often use MRR. Both exclude one-time fees like setup costs. The choice primarily depends on contract length and company preference for monthly versus yearly planning.
Growing MRR requires optimizing multiple revenue levers simultaneously. Acquire new customers through marketing and sales—this drives New MRR directly. Implement upselling strategies offering premium tiers with additional features. Enable cross-selling by developing complementary products or add-ons. Use usage-based pricing that automatically expands as customers grow. Reduce churn through improved onboarding, customer success, and proactive support—preventing MRR loss is often easier than adding new MRR. Expand into new market segments or geographies. Increase prices strategically for new customers or at renewal for existing customers where value justifies it. Win back churned customers through reactivation campaigns. Focus on negative churn where expansion revenue exceeds churn. Balance new customer acquisition with expansion revenue from existing customers for sustainable, capital-efficient growth.