Monthly Recurring Revenue (MRR) is the predictable revenue that a company expects to receive every month from its subscribers. It’s one of the most important metrics for any subscription-based business.
How to Calculate MRR
MRR is calculated by multiplying the number of paying customers by the average revenue per customer per month:
MRR = Number of Customers × Average Revenue Per User (ARPU)
For example, if you have 100 customers paying $50 per month, your MRR would be $5,000.
Why MRR Matters
MRR is crucial for understanding business growth trends, forecasting future revenue, and making informed decisions about scaling operations. It provides a clear picture of your company’s financial health and growth trajectory.
Types of MRR
New MRR: Revenue from new customers
Expansion MRR: Additional revenue from existing customers (upgrades, add-ons)
Contraction MRR: Lost revenue from downgrades
Churned MRR: Lost revenue from cancelled subscriptions
Best Practices for MRR Tracking
- Track MRR movements monthly to identify trends
- Segment MRR by customer type, plan, or cohort
- Monitor the ratio of expansion vs. churn MRR
- Use MRR data to forecast annual recurring revenue (ARR)
Understanding and optimizing your MRR is essential for sustainable SaaS growth and investor confidence.
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