What is Monthly Recurring Revenue (MRR)?
Monthly recurring revenue (MRR) is the predictable, normalized revenue a subscription business earns each month from active subscribers — the single most important financial metric for SaaS and subscription companies.
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What is Monthly Recurring Revenue (MRR)?
Monthly recurring revenue (MRR) is the total predictable revenue your subscription business generates from active customers each month — normalized to exclude one-time charges, discounts, and variable fees.
The basic formula: number of active subscribers × average revenue per subscriber = MRR. A SaaS company with 500 customers paying $100/month has $50,000 MRR. Annual subscriptions get divided by 12 for MRR calculation — a $1,200/year plan contributes $100/month to MRR.
MRR is the heartbeat metric for subscription businesses. Investors, operators, and boards use it to gauge business health. Bessemer Venture Partners calls it the “single most important metric” for SaaS companies, and their Cloud Index tracks MRR growth rates as the primary valuation driver.
Why Does MRR Matter?
MRR turns the chaos of varying subscription plans, billing cycles, and upgrades into one clean number that tells you whether the business is growing, flat, or shrinking.
- Revenue predictability — Unlike one-time sales, MRR tells you what next month’s revenue floor looks like
- Growth tracking — MRR growth rate is the primary metric investors use to value subscription businesses
- Health diagnostics — MRR components (new, expansion, churned, contraction) reveal exactly where growth is coming from or leaking
- Forecasting — With historical MRR data and churn rates, you can project future revenue with reasonable accuracy
A business doing $1M in annual revenue sounds the same whether it’s a SaaS company with $83K MRR or a project-based agency. But their growth trajectories, valuations, and operational stability are completely different.
How MRR Works
MRR has several components that together tell the full growth story.
New MRR
Revenue from brand-new customers acquired this month. If you sign 20 new customers at $99/month, that’s $1,980 in new MRR. This number depends on your sales funnel and lead generation engine.
Expansion MRR
Additional revenue from existing customers who upgrade their plan or add seats/features. This is the most profitable MRR because there’s no customer acquisition cost. Companies with strong net revenue retention grow expansion MRR faster than new MRR.
Churned MRR
Revenue lost from customers who cancel. If 10 customers on $99/month plans leave, that’s $990 in churned MRR. Tracking churned MRR alongside churn rate reveals whether you’re losing high-value or low-value customers.
Net New MRR
The number that matters most: New MRR + Expansion MRR - Churned MRR - Contraction MRR = Net New MRR. Positive net new MRR means you’re growing. Negative means you’re shrinking. Simple.
MRR Examples
Example 1: SaaS growth breakdown A project management tool has $200K MRR. This month: $25K new MRR, $15K expansion MRR, $12K churned MRR, $3K contraction MRR. Net new MRR: $25K. Ending MRR: $225K. The business is growing 12.5% month-over-month — a strong trajectory.
Example 2: Content service theStacc tracks MRR across its subscription tiers — Blog SEO ($99-$199/month), Local SEO ($49-$99/month), and Social ($49/month). Each new customer adds predictable MRR. Expansion happens when customers add modules (Blog + Local + Social). The organic content theStacc publishes for clients also compounds — building an organic traffic asset that grows MRR through inbound leads.
Common Mistakes to Avoid
Most businesses make the same handful of errors. Recognizing them saves months of wasted effort.
Chasing tactics without strategy. Jumping on every new channel or trend without a clear plan. TikTok one month, LinkedIn the next, podcasts after that — none done well enough to produce results. Pick your channels based on where your audience actually spends time, not what’s trending on marketing Twitter.
Measuring the wrong things. Tracking impressions and likes instead of conversion rate and revenue. Vanity metrics feel good in reports. They don’t pay the bills.
Ignoring existing customers. Most marketing teams focus 90% of their energy on acquisition and 10% on retention. The math says that’s backwards — acquiring a new customer costs 5-7x more than keeping one.
Key Metrics to Track
| Metric | What It Measures | Good Benchmark |
|---|---|---|
| Customer Acquisition Cost (CAC) | Total cost to acquire one customer | Varies by industry — lower is better |
| Customer Lifetime Value (CLV) | Revenue from a customer over time | Should be 3x+ your CAC |
| Conversion Rate | % of visitors who take desired action | 2-5% for websites, 15-25% for email |
| Return on Investment (ROI) | Revenue generated vs money spent | 5:1 is a common benchmark |
| Click-Through Rate (CTR) | % of people who click after seeing | 2-5% for ads, 3-10% for email |
Quick Comparison
| Aspect | Basic Approach | Advanced Approach |
|---|---|---|
| Strategy | Ad hoc, reactive | Planned, data-driven |
| Measurement | Vanity metrics (likes, views) | Business metrics (revenue, CAC, LTV) |
| Tools | Spreadsheets, manual tracking | Marketing automation, CRM integration |
| Timeline | Short-term campaigns | Long-term compounding strategy |
| Team | One person does everything | Specialized roles or automated workflows |
Frequently Asked Questions
What’s the difference between MRR and ARR?
MRR is monthly. ARR (Annual Recurring Revenue) is MRR × 12. SaaS companies under $10M typically track MRR; larger companies and investors often prefer ARR. They measure the same thing at different time scales.
Should one-time fees be included in MRR?
No. Setup fees, implementation charges, and one-time purchases should be excluded. MRR only counts revenue that repeats predictably each month. Including one-time revenue inflates MRR and creates misleading growth data.
What MRR growth rate is good?
15-20% month-over-month growth is exceptional for early-stage SaaS. 5-10% is strong for companies past $1M ARR. At scale ($10M+ ARR), 3-5% monthly growth is still healthy. The key is consistent net positive MRR growth — not spiky months followed by flat ones.
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Sources
Related Terms
Annual recurring revenue (ARR) is the annualized value of a company's recurring subscription revenue — calculated as MRR multiplied by 12 — serving as the primary valuation and growth metric for SaaS and subscription businesses.
Average Revenue Per User (ARPU)Average revenue per user (ARPU) is total revenue divided by the number of active users over a specific period — measuring how much revenue each customer generates on average and serving as a key indicator of pricing effectiveness and monetization health.
Churn RateChurn rate is the percentage of customers who stop using your product or service during a given period. Learn the formula, benchmarks, and how to reduce churn.
Customer Lifetime Value (CLV/LTV)Customer lifetime value (CLV or LTV) is the total revenue a business expects from a single customer. Learn the formula, how to calculate it, and how to increase CLV.
Net Revenue Retention (NRR)Net revenue retention (NRR) is the percentage of recurring revenue retained from existing customers after accounting for expansions, contractions, and churn — showing whether your customer base is growing or shrinking without any new sales.
