MRR
What is MRR?
MRR (Monthly Recurring Revenue) is a normalized revenue metric that represents the predictable, recurring revenue component of a subscription business generated each month. MRR excludes one-time fees, variable usage charges, and non-recurring revenue, providing a standardized view of subscription health.
As the foundational metric for subscription-based businesses, particularly B2B SaaS companies, MRR enables consistent period-over-period comparison regardless of billing frequency. A company might have customers on monthly, quarterly, and annual plans—MRR normalizes all these to a monthly basis, dividing annual contracts by 12 and quarterly by 3. This standardization allows finance teams, investors, and operators to track growth trends, forecast revenue, and benchmark performance. MRR serves as the building block for other critical SaaS metrics including Annual Recurring Revenue (ARR), Net Revenue Retention (NRR), customer lifetime value, and growth rate calculations. According to SaaS Capital's survey of private B2B SaaS companies, median MRR growth rates for early-stage companies (under $10M ARR) range from 5-10% monthly, while growth typically slows to 2-4% monthly as companies scale past $50M ARR.
Key Takeaways
Normalized revenue view: MRR standardizes all recurring subscriptions to monthly amounts, enabling apples-to-apples comparison across different billing frequencies
Forward-looking indicator: Unlike backward-looking revenue recognition, MRR provides real-time visibility into subscription health and growth trajectory
Components matter: Total MRR comprises New MRR (new customers), Expansion MRR (upsells/cross-sells), Contraction MRR (downgrades), and Churned MRR (cancellations)
Excludes variability: MRR intentionally excludes one-time fees, professional services, and usage-based charges to isolate recurring subscription value
Foundation for valuation: SaaS company valuations often use revenue multiples based on ARR (MRR × 12), making accurate MRR tracking critical for fundraising and M&A
How It Works
MRR operates as a real-time revenue measurement system that tracks subscription value month-over-month:
Base Calculation starts with identifying all active subscriptions at a given point in time (typically month-end). For each subscription, determine the monthly value: customers on monthly plans contribute their monthly fee directly, annual plans divide by 12, quarterly plans divide by 3. Sum all normalized monthly values to get total MRR.
MRR Formula:
MRR Movement Components track how MRR changes month-over-month:
New MRR: Revenue from newly acquired customers who started their subscriptions this month
Expansion MRR: Additional revenue from existing customers through upsells (higher-tier plans), cross-sells (additional products), or seat expansion
Contraction MRR: Lost revenue from existing customers through downgrades, seat reduction, or plan changes to lower tiers
Churned MRR: Lost revenue from customers who canceled their subscriptions entirely
Reactivation MRR: Revenue from previously churned customers who resubscribed (sometimes counted as New MRR)
Net New MRR Calculation:
Exclusions are equally important as inclusions. MRR should NOT include:
- One-time setup fees, implementation fees, or onboarding charges
- Professional services revenue (consulting, training, custom development)
- Hardware sales or other non-subscription products
- Usage-based or consumption-based charges (unless they're committed minimums)
- Unpaid invoices or accounts receivable (MRR tracks contracted value, not cash collected)
According to ChartMogul's SaaS metrics guidelines, accurate MRR calculation requires disciplined data hygiene, consistent methodology, and clear categorization of revenue types.
Key Features
Real-time revenue visibility showing subscription health without waiting for accounting close
Growth momentum tracking through month-over-month MRR growth rates and trend analysis
Customer segment analysis enabling MRR breakdown by plan type, customer cohort, or acquisition channel
Predictability for forecasting providing foundation for revenue projections and capacity planning
Investor-friendly metric standardized across the SaaS industry for benchmarking and valuation
Use Cases
Revenue Forecasting and Business Planning
Finance teams use MRR as the foundation for revenue forecasting and annual planning. By analyzing historical MRR growth rates, churn rates, and expansion patterns, CFOs project future revenue with greater accuracy than traditional accounting-based forecasts. For example, if a company has $2M MRR with 5% monthly growth, 2% monthly churn, and 3% expansion rate, they can model 12-month ARR projections accounting for seasonality and planned sales capacity changes. This forward-looking view enables headcount planning, budget allocation, and strategic investment decisions tied directly to expected revenue growth.
Sales Performance and Quota Management
Revenue operations leaders use New MRR and Expansion MRR to measure sales team performance and set quotas. Rather than tracking only new logos (which ignores deal size variation), teams measure contribution to MRR growth. An enterprise rep closing five $20K ARR deals contributes the same MRR as an SMB rep closing twenty $5K deals, creating fair compensation structures across segments. Customer success teams receive Expansion MRR quotas, incentivizing them to drive adoption, prove value, and expand accounts. Platforms like Saber help sales and customer success teams identify expansion opportunities by providing signals about product usage, hiring activity, and company growth that indicate expansion readiness.
Investor Reporting and Fundraising
SaaS companies report MRR and ARR (MRR × 12) to investors as primary health indicators. Board decks typically include MRR charts showing ending balance, net new MRR breakdown by component, and month-over-month growth rates. During fundraising, investors scrutinize MRR composition: high-quality MRR from expansion and low churn signals product-market fit and efficient growth, while MRR heavily dependent on new customer acquisition with high churn raises concerns about sustainability. Company valuations often use revenue multiples (e.g., 10x ARR for fast-growing SaaS companies), making accurate MRR tracking directly impact valuation. According to SaaS industry research, public SaaS companies trade at median multiples of 8-12x ARR, with premium valuations for companies showing 40%+ growth with efficient unit economics.
Implementation Example
Here's how a B2B SaaS company tracks and analyzes MRR across their business:
MRR Movement Tracking (January 2026)
MRR Component | Amount | Change vs Dec | Customer Count | Avg per Customer |
|---|---|---|---|---|
Beginning MRR (Dec 31) | $2,450,000 | - | 815 | $3,006 |
New MRR | +$125,000 | +15% | 38 new | $3,289 |
Expansion MRR | +$67,000 | +8% | 92 expanded | $728 |
Contraction MRR | -$18,000 | -10% | 34 downgraded | -$529 |
Churned MRR | -$44,000 | -5% | 15 churned | -$2,933 |
Net New MRR | +$130,000 | +5.3% | - | - |
Ending MRR (Jan 31) | $2,580,000 | +5.3% | 838 | $3,079 |
Key Insights:
- Monthly MRR growth: 5.3% ($130K net new on $2.45M base)
- New customer acquisition strong: 38 customers at higher ACV ($3,289 vs $3,006 average)
- Expansion MRR healthy: $67K from upsells/seat expansion in 92 accounts
- Churn impact moderate: Lost $44K from 15 customers (1.8% MRR churn rate)
MRR by Customer Segment
Segment | MRR | % of Total | Customer Count | Avg MRR/Customer | Growth Rate | NRR |
|---|---|---|---|---|---|---|
Enterprise | $1,290,000 | 50% | 95 | $13,579 | +7% | 118% |
Mid-Market | $850,000 | 33% | 243 | $3,498 | +5% | 108% |
SMB | $440,000 | 17% | 500 | $880 | +2% | 85% |
Total | $2,580,000 | 100% | 838 | $3,079 | +5.3% | 107% |
Strategic Insights:
- Enterprise segment drives 50% of MRR with only 11% of customers, showing high revenue concentration
- Enterprise Net Revenue Retention of 118% indicates strong expansion, offsetting limited new logo acquisition
- SMB segment shows 85% NRR (15% net contraction), suggesting product-market fit challenges in downmarket
MRR Cohort Analysis (Annual Contracts)
MRR Dashboard Example (Metrics to Track)
Current Month Metrics:
- Ending MRR: $2,580,000
- Net New MRR: +$130,000 (+5.3%)
- MRR Growth Rate: 5.3%
- Gross MRR Churn Rate: 1.8%
- Net MRR Retention: 107%
Component Breakdown:
- New MRR: $125,000 (96% of net new)
- Expansion MRR: $67,000 (52% of net new)
- Contraction MRR: -$18,000 (14% of gross adds)
- Churned MRR: -$44,000 (1.8% of beginning MRR)
Efficiency Metrics:
- CAC Payback Period: 14 months
- LTV:CAC Ratio: 4.2:1
- ARR (MRR × 12): $30.96M
- ARR Growth Rate (YoY): 78%
Salesforce MRR Tracking Implementation
Custom Fields on Opportunity:
- MRR_Amount__c (Currency): Calculated MRR value
- MRR_Type__c (Picklist): New, Expansion, Contraction, Churn, Reactivation
- Annual_Contract_Value__c (Currency): Total annual value
- Billing_Frequency__c (Picklist): Monthly, Quarterly, Annual
Formula for MRR Calculation:
Monthly MRR Report:
- Group by: Close Date (Month), MRR Type
- Sum: MRR Amount
- Filters: Stage = Closed Won, Product Type = Subscription
- Running Total: Calculate cumulative MRR
- Chart: Stacked bar showing MRR components by month
Related Terms
ARR (Annual Recurring Revenue): MRR multiplied by 12, annualized view of recurring revenue
Net Revenue Retention (NRR): Percentage of revenue retained from existing customers including expansion
Churn Rate: Rate at which customers cancel subscriptions
Customer Lifetime Value (LTV): Total revenue expected from a customer over their lifetime
CAC (Customer Acquisition Cost): Total cost to acquire a new customer
Expansion Revenue: Additional revenue from existing customers through upsells and cross-sells
Bookings: Total contract value signed, different from recognized revenue
SaaS Metrics: Suite of metrics specific to subscription business models
Frequently Asked Questions
What is MRR?
Quick Answer: MRR (Monthly Recurring Revenue) is the normalized monthly value of all active subscriptions, calculated by dividing annual contracts by 12 and quarterly by 3 to provide consistent month-over-month revenue comparison.
MRR represents the predictable, recurring subscription revenue a SaaS company generates each month, excluding one-time fees, variable charges, and non-recurring revenue. It serves as the foundational metric for subscription businesses, enabling growth tracking, forecasting, and performance benchmarking. Unlike traditional revenue recognition which follows accounting rules and timing, MRR provides real-time visibility into subscription health and forward-looking revenue trajectory.
How do you calculate MRR?
Quick Answer: Calculate MRR by summing the monthly value of all active subscriptions: monthly plans contribute their monthly fee directly, annual plans divide by 12, and quarterly plans divide by 3.
For each active customer subscription at month-end, normalize to monthly: $100/month plan = $100 MRR, $1,200/year plan = $100 MRR ($1,200/12), $300/quarter plan = $100 MRR ($300/3). Sum all normalized values for total MRR. Track changes through New MRR (new customers), Expansion MRR (upsells), Contraction MRR (downgrades), and Churned MRR (cancellations). Ending MRR = Beginning MRR + New + Expansion - Contraction - Churned. Exclude one-time fees, professional services, usage charges, and unpaid invoices. According to SaaS metrics best practices, consistency in methodology matters more than perfect precision—choose calculation rules and apply them uniformly.
What's the difference between MRR and ARR?
Quick Answer: MRR is monthly recurring revenue, while ARR is annual recurring revenue (typically MRR × 12), with ARR used more commonly by companies with annual contracts and larger deal sizes.
MRR provides monthly granularity useful for tracking short-term trends, optimizing growth tactics, and identifying issues quickly. ARR provides annual perspective aligning with budget cycles, investor reporting, and strategic planning. Companies with primarily monthly subscriptions and lower ACV often focus on MRR. Enterprise SaaS companies with annual contracts and $50K+ ACV typically emphasize ARR. Both measure the same underlying subscription value at different time scales: $2M MRR = $24M ARR. Some organizations track both, using MRR for operational management and ARR for external reporting.
Should usage-based revenue be included in MRR?
The answer depends on whether the usage is committed or variable. If customers commit to minimum monthly usage amounts (e.g., "pay $5,000/month minimum, with overages beyond 100K API calls"), the committed minimum belongs in MRR since it's predictable and recurring. Variable usage charges should be excluded from MRR and tracked separately as "usage revenue" or "variable revenue." For companies with hybrid models (base subscription + usage), many track "Subscription MRR" and "Usage Revenue" separately, then combine for total revenue. According to Bessemer Venture Partners' cloud metrics guide, pure usage-based or consumption-based models should track "Monthly Recurring Consumption" (MRC) as a proxy, using trailing 3-month average consumption to smooth volatility.
How does MRR relate to revenue recognition?
MRR and GAAP revenue recognition serve different purposes and often differ significantly. MRR measures contracted subscription value in real-time, providing operational visibility into subscription health. Revenue recognition follows accounting standards (ASC 606) that determine when revenue can be recorded on financial statements based on delivery, not just contract signing. A customer signing a $12K annual contract contributes $12K ARR / $1K MRR immediately, but GAAP revenue recognizes only $1K per month as the service is delivered. For SaaS companies with large upfront annual contracts, MRR and ARR typically exceed recognized revenue early in growth phases. Understanding both metrics provides complete financial picture: MRR for operational management and growth trajectory, recognized revenue for formal financial reporting and compliance.
Conclusion
MRR stands as the single most important metric for subscription-based businesses, providing real-time visibility into revenue health, growth momentum, and business sustainability. For revenue operations teams, accurate MRR tracking enables sophisticated analysis of customer segments, cohort performance, and unit economics that drive strategic decisions. Sales organizations use MRR to set quotas, measure performance, and forecast capacity needs, while customer success teams focus on Expansion MRR as a key outcome metric demonstrating value delivery.
Finance and executive leadership rely on MRR for investor reporting, board presentations, and strategic planning. The metric's standardization across the SaaS industry enables meaningful benchmarking against competitors and comparable companies at similar growth stages. During fundraising or M&A processes, MRR composition—particularly the balance between new customer acquisition and expansion—directly impacts valuation and deal terms.
As SaaS business models evolve toward usage-based pricing, product-led growth, and hybrid monetization, MRR calculation methodologies must adapt while maintaining the core principle: measuring predictable, recurring subscription value. Forward-looking organizations supplement traditional MRR with metrics like Committed MRR (from annual contracts), Consumption MRR (from usage-based models), and Net Revenue Retention rates that provide deeper insight into subscription health. Companies excelling at MRR management combine disciplined tracking, component-level analysis, and proactive strategies to optimize each lever—accelerating new customer acquisition, maximizing expansion, minimizing contraction, and reducing churn.
For related SaaS metrics and growth strategies, explore ARR, Net Revenue Retention, and Customer Lifetime Value.
Last Updated: January 18, 2026
