Monthly recurring revenue
em-ar-AR
The monthly value of active subscription contracts. ARR divided by 12, or the sum of all monthly subscription fees.
MRR is the monthly version of ARR. If a customer pays $1,200 per year, that is $100 in MRR. If another customer pays $500 per month, that is $500 in MRR. Add them all up.
Early-stage companies and PLG businesses often track MRR because it moves faster than ARR and reveals trends sooner. If MRR grew 8% month-over-month for three straight months, you can project an annualized growth rate with more confidence. If MRR flatlines in March, you know immediately instead of waiting for the quarterly ARR review.
MRR is especially useful when broken into components: new MRR (from new customers), expansion MRR (from upgrades), contraction MRR (from downgrades), and churned MRR (from cancellations). This decomposition shows you exactly where growth comes from and where you are leaking.
Examples
A PLG company tracks monthly growth.
January MRR: $85k. February: $92k. March: $99k. Month-over-month growth rates: 8.2%, 7.6%. The trend is strong. At this rate, they will cross $100k MRR in April.
MRR decomposition reveals a problem.
Total MRR grew from $200k to $210k. Looks healthy. But new MRR was $30k, expansion was $5k, contraction was $8k, and churn was $17k. Gross churn of $25k on a $200k base is 12.5% monthly. The company is growing but leaking badly.
A finance team converts MRR to ARR for investors.
Current MRR is $415k. ARR is $415k times 12, or $4.98M. The CEO rounds to $5M ARR in the pitch deck. The CFO insists on $4.98M in the data room.
In practice
Read more on the blog
Frequently asked questions
When should you track MRR versus ARR?
Track MRR when most customers pay monthly or when you need to see trends faster. Track ARR when most customers are on annual contracts. Most companies track both. MRR for operational decisions, ARR for board-level reporting.
How do you calculate MRR for annual contracts?
Divide the annual contract value by 12. A $60k annual contract contributes $5k in MRR. A $120k annual contract contributes $10k in MRR.
Related terms
The annualized value of your active subscription contracts. The heartbeat metric of every SaaS business.
The rate at which customers cancel or do not renew. Measured as logo churn (customers lost) or revenue churn (dollars lost).
Additional revenue from existing customers through upsells, cross-sells, and increased usage. The engine of net-negative churn.
The percentage of revenue retained from existing customers after expansion, contraction, and churn. Above 100% means you grow without new sales.
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