MRR (Monthly Recurring Revenue)
MRR (Monthly Recurring Revenue) is the normalized monthly revenue generated from all active subscription contracts, excluding one-time fees, professional services, and usage overages; MRR is calculated by summing the monthly-equivalent value of all active subscriptions; Tracking MRR by component exposes whether growth is coming from acquisition (New MRR) or from existing customers expanding (Expansion MRR), which have very different cost structures
MRR (Monthly Recurring Revenue) is the normalized monthly revenue generated from all active subscription contracts, excluding one-time fees, professional services, and usage overages. It is the foundational metric for measuring the scale and growth trajectory of a subscription business.
How it works
MRR is calculated by summing the monthly-equivalent value of all active subscriptions. Annual contracts are divided by 12 to normalize them. MRR changes are tracked by component: New MRR (new customers), Expansion MRR (upgrades), Contraction MRR (downgrades), and Churned MRR (cancellations).
Key facts
- MRR components: New, Expansion, Contraction, and Churned MRR reveal the sources of growth and loss
- Normalization: Annual and multi-year contracts are divided by contract months for apples-to-apples comparison
- Net New MRR: New MRR plus Expansion MRR minus Contraction MRR minus Churned MRR
For builders
Tracking MRR by component exposes whether growth is coming from acquisition (New MRR) or from existing customers expanding (Expansion MRR), which have very different cost structures. A business with high Churned MRR is running a leaky bucket regardless of New MRR.
Sources
- Bessemer Venture Partners. State of the Cloud annual report. bvp.com
- SaaStr. SaaS benchmarks and metrics archive. saastr.com
- Bain & Company. The Net Promoter System. bain.com
- KPMG. Private SaaS Company Survey. kpmg.com
- ChartMogul. SaaS metrics benchmarks and definitions. chartmogul.com
