What is MRR?

Monthly recurring revenue (MRR) is the predictable revenue your subscription business earns each month. It is the heartbeat metric of SaaS because it smooths out the lumpy timing of invoices and shows the size of the business you have right now.

MRR only counts recurring subscription revenue. One-time setup fees, consulting work, hardware, and refunds are excluded, because they don't repeat next month.

The MRR formula

MRR = Σ (monthly price of each plan × number of customers on that plan)

The step people get wrong is annual billing. A customer who pays $1,200 upfront for a year contributes $100 of MRR, not $1,200. That's why this calculator divides yearly prices by 12 before adding them up. If you counted the full annual payment, your MRR would spike in the month someone renews and crash the month after, which hides how the business is actually doing.

Worked example

Plan Price Billing Customers MRR
Starter $19 monthly 120 $2,280
Pro $49 monthly 45 $2,205
Pro (annual) $470 yearly 30 $1,175
Total 195 $5,660

That business has $67,920 ARR (MRR × 12) and an ARPU of $29.03 ($5,660 ÷ 195 customers).

ARR and ARPU

  • ARR (annual run rate) is MRR × 12. It's the number investors and acquirers usually quote, and it's handy once you're past ~$100K a year.
  • ARPU (average revenue per user/account) is MRR ÷ paying customers. Raising ARPU through better packaging or annual upgrades is often easier than finding new customers. Our pricing guide covers how.

MRR movements worth tracking

Total MRR hides what's going on underneath, so break the monthly change into components:

  • New MRR: from brand-new customers
  • Expansion MRR: upgrades, extra seats, add-ons
  • Contraction MRR: downgrades
  • Churned MRR: cancellations
  • Reactivation MRR: former customers coming back

Net new MRR = new + expansion + reactivation − contraction − churned. If net new MRR is shrinking while new MRR is steady, you have a retention problem, not a marketing problem. Measure it with the churn rate calculator.

Common MRR mistakes

  1. Counting annual payments as one month of revenue. Normalize them to monthly.
  2. Including free trials. A trial isn't revenue until it converts.
  3. Ignoring discounts. Use what customers actually pay, not list price.
  4. Counting one-off fees. Setup fees and services are not recurring.
  5. Booking MRR before payment succeeds. Failed cards are a big hidden source of churn.

Once you know your MRR, find out when you'll hit your next milestone and turn it into a card to share.