Complete Definition
Monthly Recurring Revenue (MRR) is the lifeblood metric for subscription-based businesses. It represents the predictable, normalized revenue you can expect each month from your active subscriptions.
MRR is crucial because it provides visibility into your revenue trajectory and helps with forecasting, planning, and understanding growth patterns.
How to Calculate MRR
MRR = Number of Customers × Average Revenue Per Account (ARPA)
Or sum all recurring revenue: MRR = Σ (Monthly subscription value of each customer)
Types of MRR
**New MRR** Revenue from new customers acquired this month.
**Expansion MRR** Additional revenue from existing customers (upgrades, add-ons).
**Churned MRR** Revenue lost from customers who cancelled.
**Contraction MRR** Revenue lost from downgrades.
**Net New MRR** Net New MRR = New MRR + Expansion MRR - Churned MRR - Contraction MRR
Why MRR Matters
- Predictable revenue enables better planning - Essential for SaaS valuation (often 5-15x ARR) - Shows true growth trajectory - Identifies revenue health issues early - Required metric for most SaaS investors