Monthly Recurring Revenue (MRR) is the lifeblood metric for any subscription-based business. It represents the normalized monthly value of all active recurring revenue streams, providing a clear snapshot of your business's current revenue generation capacity.
MRR is calculated by normalizing all your subscription revenue to a monthly amount. Annual subscriptions are divided by 12, quarterly by 3, and so on. This gives you a consistent view of your recurring revenue baseline regardless of billing cycles.
Most SaaS and subscription businesses track several variations: New MRR (from new customers), Expansion MRR (from upgrades), Contraction MRR (from downgrades), and Churned MRR (from cancellations). Understanding these components helps you diagnose growth patterns and identify problems early.
How to Calculate MRR Step by Step
Step 1: Export your active subscriptions. In Stripe, go to Billing → Subscriptions and export all active subscriptions. In Chargebee or Recurly, pull the same report. You need: customer name, plan amount, billing interval, and status.
Step 2: Normalize to monthly amounts. Convert every subscription to its monthly equivalent:
- Monthly plans: use as-is ($100/mo = $100 MRR)
- Annual plans: divide by 12 ($1,200/yr = $100 MRR)
- Quarterly plans: divide by 3 ($300/quarter = $100 MRR)
- Usage-based: use the last month's actual billing amount
Step 3: Sum it all up.
- 120 monthly subscribers at various price points: $18,000
- 40 annual subscribers normalized: $8,333
- 15 quarterly subscribers normalized: $2,500
- Total MRR = $28,833
Step 4: Break down MRR movements. Compare this month's MRR to last month's, and categorize every change:
- New MRR: $3,200 (from 12 new customers)
- Expansion MRR: $1,800 (from 8 customers who upgraded)
- Contraction MRR: -$600 (from 3 customers who downgraded)
- Churned MRR: -$2,100 (from 7 customers who cancelled)
- Net New MRR: $3,200 + $1,800 - $600 - $2,100 = $2,300
This breakdown is what investors actually want to see, not just the topline number.
Step 5: Exclude non-recurring revenue. Setup fees, consulting hours, one-time add-ons, and pilot/POC payments are not MRR. If a customer paid $5,000 for implementation plus $500/mo subscription, only $500 is MRR.
Common mistakes founders make:
- Including one-time charges or non-recurring revenue
- Counting free trial users who haven't converted
- Not normalizing annual contracts (reporting $12,000 in the month it's collected instead of $1,000/mo)
- Forgetting to subtract payment processor fees (MRR should be gross, before Stripe's cut)
- Counting committed but not yet active contracts
Skip the spreadsheet. Unlike traditional accounting software, Futureproof calculates MRR and all its components automatically from your Stripe data, including the movement breakdown investors want to see.
Formula
MRR = Sum of all monthly subscription values
For annual plans:
MRR = (Annual Contract Value) ÷ 12
Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR
Example
Your SaaS company has:
- 50 customers on $100/month plans = $5,000 MRR
- 20 customers on $1,200/year plans = $2,000 MRR ($1,200 ÷ 12)
- 10 customers on $300/quarter plans = $1,000 MRR ($300 ÷ 3)
Total MRR = $5,000 + $2,000 + $1,000 = $8,000