Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is the total predictable revenue your business earns from subscriptions in a given month.
What it means
MRR is the heartbeat of any subscription business. It's the sum of every active subscription's monthly value. If you have 100 customers paying $10/month and 20 customers paying $50/month, your MRR is $2,000.
MRR breaks down into components: new MRR (from new customers), expansion MRR (existing customers upgrading), contraction MRR (downgrades), and churned MRR (cancellations). Net new MRR is the sum of all four. Watching the components is more useful than watching the total.
For annual subscriptions, divide by 12 to convert to MRR. A customer paying $1,200/year contributes $100 to MRR. This makes MRR comparable across customers regardless of billing cycle.
Why it matters
MRR is the most important number for any subscription business. It tells you how much money you can count on each month before you do any work. Combined with churn and growth rate, MRR predicts your business's trajectory better than any other single metric.
How to calculate monthly recurring revenue (mrr)
MRR = Sum of (Monthly Subscription Value) for all active customers
Sum the monthly value of all active subscriptions. Convert annual subs by dividing yearly amount by 12.
Example with real numbers
Concrete example showing how this metric works in practice.
Scenario
You have 80 customers on a $20 monthly plan, 20 customers on a $50 monthly plan, and 5 customers on a $1,200 annual plan.
Calculation
(80 × $20) + (20 × $50) + (5 × $100) = $1,600 + $1,000 + $500 = $3,100
What it means
Your MRR is $3,100. Tracking the breakdown (new MRR, expansion MRR, churned MRR) shows you whether growth is coming from new customers or existing ones.
Common mistakes
Things people get wrong when measuring monthly recurring revenue (mrr).
Mistake 01
Including one-time fees in MRR. Setup fees, custom work, and one-off purchases aren't recurring and shouldn't be counted.
Mistake 02
Not adjusting annual subscriptions. A $1,200/year customer adds $100 to MRR, not $1,200.
Mistake 03
Tracking MRR without breaking down components. Total MRR can be growing while churn is masking weakness.
Mistake 04
Confusing MRR with revenue. MRR is forward-looking subscription value. Revenue is what actually got paid.
How to track it
Most subscription billing tools (Stripe, Paddle, Lemon Squeezy) track MRR automatically. Review weekly. The breakdown into new, expansion, contraction, and churned MRR is more actionable than the total.
Related concepts
Other terms worth learning if you're studying this one.
Common questions about monthly recurring revenue (mrr)
MRR (Monthly Recurring Revenue) is the total predictable monthly revenue from subscriptions. It's calculated by summing the monthly value of every active subscription.
Divide the annual subscription amount by 12. A customer paying $1,200/year contributes $100 to MRR, not $1,200.
ARR (Annual Recurring Revenue) is MRR multiplied by 12. They measure the same thing on different time scales. ARR is more common for B2B SaaS, MRR for indie SaaS and consumer subscriptions.
Net new MRR is new MRR plus expansion MRR minus contraction MRR minus churned MRR. It's the actual change in MRR for a period and the most useful single number for tracking growth.