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MRR

General

Monthly Recurring Revenue

The predictable revenue a subscription business expects to collect every month from active customers — the core health metric for any SaaS or membership business.

Written by · Reviewed by the thecalcu.com team · Last updated June 29, 2026

What is MRR?

MRR (Monthly Recurring Revenue) is the predictable revenue a subscription business expects to collect every month from its active customer base. It strips out one-time payments, professional services, and usage spikes to isolate the recurring core of the business, the number investors, founders, and finance teams watch most closely to judge a SaaS company's health and growth trajectory.

MRR matters because it converts lumpy, unpredictable cash inflows into a normalised, comparable metric. A customer paying $1,200 once a year and a customer paying $100 every month contribute the same $100 to MRR, making it possible to compare revenue health across customers on different billing cycles.

Formula

MRR = Sum of (Monthly Price × Active Customers) across all plans and tiers

MRR = Total Annual Contract Value / 12 (for customers billed annually)

ARR = MRR × 12

Net New MRR = New MRR + Expansion MRR − Churned MRR − Contraction MRR

Worked Example

A SaaS company has three pricing tiers:

Tier Price/month Customers MRR Contribution
Starter $29 100 $2,900
Pro $99 40 $3,960
Enterprise $499 5 $2,495
Total MRR 145 customers $9,355

ARR = $9,355 × 12 = $112,260

If monthly churn is 3%, projected next-month MRR after losing churned customers:

Projected MRR = $9,355 × (1 − 0.03) = $9,074.35

Use the MRR / ARR calculator to model this across your own pricing tiers and churn assumptions.

Key Things to Know

  • MRR is a snapshot, not a forecast: MRR tells you what you're collecting right now, not what you'll collect next month. Combine it with churn rate to project forward, a company with high MRR but high churn can shrink quickly despite looking healthy on paper.
  • Watch the composition, not just the total: Two companies can have identical $50,000 MRR, but one driven by 500 small accounts and another by 5 large enterprise accounts have very different risk profiles, concentration risk matters as much as the headline number.
  • MRR feeds directly into valuation: SaaS companies are commonly valued as a multiple of ARR (often 3-10× depending on growth rate, margins, and market conditions). Small swings in MRR growth rate can materially change a company's valuation multiple, which is why investors scrutinise MRR trends closely during fundraising.
  • Burn rate context matters: A company's burn rate relative to its MRR determines runway and the urgency of reaching profitability or raising more capital, MRR growth alone doesn't guarantee survival if costs are growing faster.
  • Cohort-level MRR reveals retention quality: Tracking MRR by customer signup cohort (e.g., all customers who joined in January) shows how revenue from a given group evolves over time, expanding, flat, or shrinking, which is a much sharper signal of product-market fit than aggregate MRR alone.

Related Calculators

MRR / ARR Calculator →Calculate your Monthly and Annual Recurring Revenue (MRR/ARR) across pricing tiers, plus projected next-month MRR after churn. Free SaaS metrics calculator.
Churn Rate Calculator →Calculate your monthly and annual churn rate instantly. Enter customers at the start and end of a period to find churn rate and average customer lifespan.
Customer Lifetime Value Calculator →Calculate Customer Lifetime Value (CLV) instantly. Enter average order value, purchase frequency, customer lifespan, and gross margin to find your true CLV.
Customer Acquisition Cost Calculator →Calculate Customer Acquisition Cost (CAC) instantly. Enter your marketing and sales spend with new customers acquired to find CAC and your LTV:CAC health ratio.

Related Terms

ARRAnnual Recurring RevenueChurn RateCustomer Churn RateCLVCustomer Lifetime ValueBurn RateCash Burn Rate

Frequently Asked Questions

What is the difference between MRR and ARR?

MRR (Monthly Recurring Revenue) is the predictable revenue collected each month from active subscriptions. ARR (Annual Recurring Revenue) is simply MRR annualised, ARR = MRR × 12. SaaS companies under roughly $1M in revenue typically report MRR because month-to-month movement is more informative at that stage; larger companies and most investors prefer ARR since it's easier to compare against annual budgets, valuations, and other businesses.

Does MRR include one-time fees or annual contracts?

No. MRR should only include recurring subscription revenue, normalised to a monthly figure. One-time setup fees, professional services, and usage-based overages are typically excluded or reported separately. Annual contracts are converted to their monthly equivalent (an annual plan worth $1,200 contributes $100 to MRR) rather than being recognised as a lump sum in the month they're paid.

What is the difference between new MRR, expansion MRR, and churned MRR?

New MRR is revenue from newly acquired customers in a given month. Expansion MRR is additional revenue from existing customers upgrading plans, adding seats, or buying add-ons. Churned MRR is revenue lost from cancellations or downgrades. Net New MRR = New MRR + Expansion MRR − Churned MRR. Tracking these components separately reveals whether growth is coming from new sales or from making existing customers more valuable.

What is a healthy MRR growth rate?

Early-stage SaaS companies (pre-seed to Series A) often aim for 10-20% month-over-month MRR growth, though this is extremely difficult to sustain. Growth-stage companies typically target 3-7% monthly, which compounds to roughly 50-100%+ annually. The 'T2D3' benchmark used by some VCs (triple, triple, double, double, double over five years) implies very high early growth rates that taper as the revenue base grows larger and the same percentage requires far more absolute dollars.

How does churn affect MRR even without losing customers?

MRR can shrink even if no customer fully cancels, through downgrade churn, a customer moving from a $99/month plan to a $29/month plan reduces MRR by $70 without appearing as a 'lost customer' in headcount. This is why SaaS businesses track gross revenue churn (dollars lost) separately from customer/logo churn (accounts lost), a low logo churn rate can mask a much higher revenue churn rate driven by downgrades.