Monthly Recurring Revenue (MRR) is the predictable, recurring revenue a business can expect to earn each month from its customers. For SaaS companies and subscription-based businesses, MRR is one of the most important metrics because it provides a clear picture of current revenue momentum, enables accurate forecasting, and serves as a foundational indicator of growth and sustainability.
Unlike one-time payments, MRR represents steady income from active subscribers, making it a reliable measurement for tracking performance over time. It helps decision-makers assess customer value, pricing strategy, and retention performance.
Why MRR Matters in SaaS and Subscription Models
In SaaS, every growth discussion eventually leads to MRR. Here’s why it matters:
Forecasting Revenue
MRR enables companies to project future cash flow and plan for hiring, development, and infrastructure.
Investor Confidence
MRR and its growth rate are key metrics VCs and private equity look at when evaluating a SaaS company.
Product-Market Fit
A growing MRR suggests increasing demand and customer satisfaction.
Retention Insight
If MRR is flat or shrinking, it indicates churn problems.
Unit Economics
MRR ties directly into customer acquisition cost (CAC) and customer lifetime value (LTV).
The Core Formula for MRR
At its core, MRR is calculated as:
MRR = Total Number of Customers × Average Revenue Per Account (ARPA)
This can be broken down into more granular subtypes:
New MRR
Revenue from newly acquired customers
Expansion MRR
Additional revenue from existing customers (upsells, cross-sells)
Churned MRR
Revenue lost from cancellations or downgrades
Net New MRR = New MRR + Expansion MRR – Churned MRR
Real-World Example 1: B2B SaaS (Email Automation Tool)
Company: MailForge
Scenario:
- 1,200 active customers
- ARPA = $79
- MRR = 1,200 × $79 = $94,800
This month:
- New MRR = $13,350
- Expansion MRR = $2,600
- Churned MRR = $6,320
Net New MRR = $9,630
Total MRR = $104,430
Real-World Example 2: D2C Subscription Box (Meal Kits)
Company: FreshCrate
Scenario:
- 5,000 subscribers
- ARPA = $32
- MRR = 5,000 × $32 = $160,000
This month:
- New MRR = $18,000
- Expansion MRR = $5,200
- Churned MRR = $12,400
Net New MRR = $10,800
Total MRR = $170,800
Use Cases by Team
- Marketing: Understand which campaigns generate highest New MRR
- Sales: Track impact of rep activities and upsells
- Product: Measure feature releases that increase Expansion MRR
- Finance: Monthly reporting, budgeting, and valuation models
- Support/Success: Monitor MRR churn by cohort or plan
Benchmarks and Industry Data
- Fast-growing SaaS startups: 15–20% MRR growth MoM
- Churn rates above 5–7% monthly = growth stall risk
- Top SaaS: >110% Net Revenue Retention
Best Practices to Improve MRR
- Optimize Pricing: Tiers, bundles, usage-based pricing
- Focus on Retention: Reduce Churned MRR
- Upsell Smartly: Contextual upgrades and add-ons
- Shorten Trial-to-Paid: Speed up activation milestones
- Expand Globally: Localization + regional pricing
- Product-Led Growth (PLG): Use product for MRR expansion
Common MRR Mistakes to Avoid
- Including one-time fees
- Not segmenting MRR types
- Including trial or delinquent accounts
- Ignoring downgrades (MRR contraction)
Clean billing data + accurate tracking = reliable MRR
Related Metrics
- ARR (Annual Recurring Revenue)
- NRR (Net Revenue Retention)
- Gross Revenue Churn
- Customer Lifetime Value (LTV)
- Customer Acquisition Cost (CAC)
- CAC Payback Period
FAQs
Is MRR better than ARR?
Both matter. MRR = short-term health; ARR = long-term view.
Should discounts be included in MRR?
Yes – record actual revenue after discounts.
Does usage-based revenue count in MRR?
Only if it’s predictable and billed monthly.
What tools help track MRR?
ChartMogul, ProfitWell, Baremetrics, Paddle, Stripe
Key Takeaway
Monthly Recurring Revenue is the financial pulse of SaaS and subscription businesses. When measured and managed correctly, it drives visibility into revenue performance, highlights scalable opportunities, and keeps every team aligned on sustainable growth.