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. Unlike traditional accounting software, purpose-built financial platforms for SaaS calculate MRR movements automatically from your subscription data.
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
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