MRR
Also: MRR, Monthly Recurring Revenue, Recurring monthly revenue, Revenu recurrent mensuel, Revenus recurrents mensuels
Monthly Recurring Revenue: the predictable, normalized monthly revenue from active subscriptions, the baseline metric for SaaS and subscription businesses.
What it is
MRR (Monthly Recurring Revenue) is the normalized amount of predictable revenue a subscription business earns each month. Only recurring subscription fees count. One-time charges (setup fees, professional services, hardware, overage penalties that are not contractual) are excluded because they are not repeatable.
Contracts billed on other cycles are converted to a monthly basis. An annual plan of 1,200 contributes 100 to MRR, not 1,200 in the month it is invoiced.
Why it matters
MRR turns lumpy invoicing into a stable, comparable signal of business health. It matters because it is:
- Predictable: the foundation for forecasting and cash planning.
- Comparable: normalizes monthly, quarterly, and annual contracts onto one scale.
- Decomposable: it can be split into growth drivers, which is where the real insight lives.
The MRR movement components
Month-over-month change in MRR is usually broken into:
- New MRR: from newly acquired customers.
- Expansion MRR: upsells, cross-sells, and seat additions from existing customers.
- Contraction MRR: downgrades that reduce (but do not end) a subscription.
- Churned MRR: revenue lost from cancellations.
Net New MRR = New + Expansion, Contraction, Churned.
A related metric, Net Revenue Retention (NRR), measures whether expansion outpaces contraction and churn within the existing base. NRR above 100% means the business grows even without new logos.
How it is used in practice
- Finance uses MRR (and its annual twin ARR = MRR x 12) for revenue forecasting, valuation, and unit economics such as LTV.
- Marketing and Sales track New MRR against Customer Acquisition Cost to judge campaign efficiency.
- Product and Customer Success watch Expansion and Churned MRR to prove retention impact.
- Data teams define the calculation rules, reconcile billing data, and prevent common distortions (double counting annual deals, mixing bookings with revenue, ignoring discounts).
Worked example
A company starts a month at 100,000 MRR. During the month:
- New customers add 12,000 (New).
- Existing customers upgrade for 5,000 (Expansion).
- Some downgrade, losing 2,000 (Contraction).
- Cancellations remove 4,000 (Churned).
Net New MRR = 12,000 + 5,000, 2,000, 4,000 = 11,000.
Ending MRR = 100,000 + 11,000 = 111,000.
Annualized, that is ARR of 1,332,000. NRR on the existing base = (100,000 + 5,000, 2,000, 4,000) / 100,000 = 99%, a small warning that retention barely trails break-even.
See also
Frequently asked questions
What exactly counts as MRR and what doesn't?
MRR (Monthly Recurring Revenue) counts only recurring subscription fees from active contracts, normalized to a monthly basis. One-time charges are excluded: setup fees, professional services, hardware, and non-contractual overage penalties, because none of them repeat. A 1,200 annual plan contributes 100 per month to MRR, not 1,200 in the month it is invoiced.
What is the difference between MRR and ARR?
ARR is simply MRR multiplied by 12: same underlying recurring revenue, different time scale. MRR is used for month-to-month operational tracking of growth and churn, while ARR is the format used in forecasting, valuation, and investor conversations.
How do you calculate Net New MRR?
Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR. New comes from newly acquired customers, Expansion from upsells, cross-sells and seat additions, Contraction from downgrades that reduce a subscription without ending it, and Churned from cancellations. Ending MRR is the starting MRR plus Net New MRR.
Which teams use MRR, and for what?
Finance uses MRR and ARR for revenue forecasting, valuation, and unit economics such as LTV. Marketing and Sales compare New MRR to Customer Acquisition Cost to judge campaign efficiency. Product and Customer Success watch Expansion and Churned MRR to demonstrate retention impact, while data teams define the calculation rules and reconcile billing data.
Why can MRR grow while Net Revenue Retention stays below 100%?
Because the two measure different things: total MRR includes new customers, while NRR looks only at the existing base. In a worked example starting at 100,000 MRR with 12,000 New, 5,000 Expansion, 2,000 Contraction and 4,000 Churned, MRR ends at 111,000 but NRR is (100,000 + 5,000 - 2,000 - 4,000) / 100,000 = 99%. Growth is being carried by acquisition while the installed base is slowly leaking.