Monthly Recurring Revenue (MRR): Types & Formula

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1. What is MRR?

Monthly Recurring Revenue (MRR) is a key SaaS metric that represents the predictable, recurring revenue a company can expect to generate every month from active subscriptions. It excludes one-time payments, setup fees, or professional services.

MRR provides a stable financial baseline for forecasting growth, budgeting, and setting revenue targets.

2. Why MRR Matters in SaaS

How do you calculate MRR?

The formula is simple:

MRR = Total Number of Active Customers × Average Revenue Per Customer (per month)

For example, if you have 100 customers each paying $100/month, your MRR is $10,000.

What are the different types of MRR?

  • New MRR: Revenue from new customers acquired in the month.
  • Expansion MRR: Revenue from upgrades or add-ons by existing customers.
  • Churned MRR: Revenue lost due to cancellations or downgrades.
  • Net New MRR: (New + Expansion) – Churned MRR

How MRR helps with growth forecasting

Tracking MRR over time shows trends in customer acquisition, retention, and expansion. It's a leading indicator of future cash flow and helps SaaS companies assess the impact of pricing changes or new features.

MRR vs ARR – What's the difference?

ARR (Annual Recurring Revenue) is simply MRR × 12. ARR is more common in enterprise SaaS, while MRR gives a more granular view, ideal for monthly reporting and agile decision-making.

Common MRR pitfalls to avoid

  • Counting one-time payments as recurring revenue
  • Not adjusting for churned or downgraded customers
  • Inflated projections from short-term promotions

FAQ

Is MRR the same as revenue?

No. MRR is only recurring subscription revenue. Revenue may include one-time sales or service fees.

Can I use MRR for freemium products?

MRR should only include paying users. Free plans are useful for user growth but not counted in revenue.

What’s a good MRR growth rate?

It depends on your stage. Early SaaS startups might aim for 15–25% MoM growth, while mature companies may target 5–10%.

How should MRR be reported to investors?

Break it down into components (New, Expansion, Churned MRR) and show MoM or YoY growth trends.