What is MRR?
Monthly Recurring Revenue
TL;DR
MRR (Monthly Recurring Revenue) is the predictable monthly revenue from subscriptions. It is ARR divided by 12.
Example
Calculating MRR:
- 100 customers × 500 kr/month = 50,000 kr MRR
- Annual plan customers: 12,000 kr/year ÷ 12 = 1,000 kr MRR each
MRR breakdown for a typical SaaS:
| Category | Amount |
|---|---|
| Starting MRR | 200,000 kr |
| + New MRR | 25,000 kr |
| + Expansion MRR | 10,000 kr |
| - Churned MRR | 15,000 kr |
| - Contraction MRR | 5,000 kr |
| = Ending MRR | 215,000 kr |
Net New MRR = 25,000 + 10,000 - 15,000 - 5,000 = 15,000 kr
This company grew 7.5% this month.
Explanation
MRR Categories
New MRR: From customers who just signed up Expansion MRR: From existing customers paying more (upgrades, more seats) Reactivation MRR: From previously churned customers returning Churned MRR: From customers who cancelled Contraction MRR: From customers who downgraded
MRR vs ARR
MRR × 12 = ARR ARR ÷ 12 = MRR
They measure the same thing at different time scales.
Use MRR when:
- Tracking month-to-month performance
- Short-term planning
- Early-stage startups
Use ARR when:
- Reporting to investors or board
- Annual planning
- Comparing to larger companies
Why It Matters
For Business Owners
MRR is your monthly pulse. While ARR gives the big picture, MRR tells you what's happening right now. It's the metric you check weekly or even daily.
MRR movement reveals trends faster. You'll spot problems (rising churn) or opportunities (expansion growth) before they show up in annual numbers.
MRR helps with cash flow. You know roughly how much money is coming in next month. This makes payroll, hiring, and expense decisions easier.
The Quick Ratio
A useful formula: (New MRR + Expansion MRR) ÷ (Churned MRR + Contraction MRR)
- Above 4: Excellent growth efficiency
- 2-4: Healthy
- Below 2: You're working hard just to stay in place
Need help with your digital project?
We build websites, apps, and digital solutions for businesses.
Get in touch