MRR (Monthly Recurring Revenue) is the total normalized monthly revenue from active subscriptions, with annual plans divided by twelve and one-time charges left out.
Why it matters
MRR shows the size and direction of a subscription business at a glance. Tracking how it changes through new customers, upgrades, downgrades and cancellations reveals whether growth is healthy or being masked by churn. It is usually broken into new, expansion, contraction and churned MRR so you can see why the total moved. Many teams review it monthly alongside churn rate.
Example
A business has 80 customers on a 20 USD monthly plan and 10 on a 240 USD yearly plan. Monthly plans give 1,600 USD. Each yearly plan counts as 20 USD per month, giving 200 USD. MRR is 1,800 USD. A one-time 500 USD setup fee is not included.
Common mistakes
- Counting one-time fees or usage spikes as recurring revenue.
- Recording the full annual payment as one month of MRR.
- Including customers on free trials who have not paid.
Related
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