Q: How do I calculate MRR?

MRR can be calculated in two main ways: From Subscriptions: Sum all monthly subscription revenue (price × subscribers for each plan) From ARR: Divide your Annual Recurring Revenue by 12

Q: How do I track MRR growth?

Track MRR movement by monitoring: New MRR: Revenue from new customers Expansion MRR: Additional revenue from existing customers (upgrades, add-ons) Contraction MRR: Lost revenue from downgrades Churned MRR: Lost revenue from cancellations Net New MRR = New + Expansion - Contraction - Churn

Q: What is a good MRR growth rate?

Good MRR growth rates vary by stage: Early stage: 10-20% month-over-month Growth stage: 5-10% month-over-month Mature stage: 2-5% month-over-month Focus on sustainable growth with healthy unit economics and retention.

Question 1

What is Monthly Recurring Revenue (MRR)?

Accepted Answer

Monthly Recurring Revenue (MRR) is the predictable revenue a business expects to receive every month from active subscriptions. It's the cornerstone metric for SaaS and subscription-based businesses.

Question 2

How do I calculate MRR?

Accepted Answer

MRR can be calculated in two main ways:

From Subscriptions: Sum all monthly subscription revenue (price × subscribers for each plan)
From ARR: Divide your Annual Recurring Revenue by 12

Question 3

What's the difference between MRR and revenue?

Accepted Answer

MRR only includes recurring subscription revenue, normalized to a monthly period. It excludes one-time fees, professional services, and variable usage charges. This makes it more predictable and useful for forecasting than total revenue.

Question 4

How do I track MRR growth?

Accepted Answer

Track MRR movement by monitoring:

New MRR: Revenue from new customers
Expansion MRR: Additional revenue from existing customers (upgrades, add-ons)
Contraction MRR: Lost revenue from downgrades
Churned MRR: Lost revenue from cancellations

Net New MRR = New + Expansion - Contraction - Churn

Question 5

What is a good MRR growth rate?

Accepted Answer

Good MRR growth rates vary by stage:

Early stage: 10-20% month-over-month
Growth stage: 5-10% month-over-month
Mature stage: 2-5% month-over-month

Focus on sustainable growth with healthy unit economics and retention.

Question 6

Should I include annual contracts in MRR?

Accepted Answer

Yes, but normalize them to a monthly amount. If a customer pays $12,000 annually, that contributes $1,000 to MRR. This provides an apples-to-apples comparison across different billing frequencies.

Question 7

What is ARPU and why does it matter?

Accepted Answer

Average Revenue Per User (ARPU) is MRR divided by total subscribers. It tells you how much value you're extracting per customer on average. Increasing ARPU through upsells and higher-tier plans is often more efficient than acquiring new customers.

Question 8

How does churn affect MRR?

Accepted Answer

Churn directly reduces MRR. If you lose customers worth $5,000 in monthly subscriptions, your MRR decreases by $5,000. High churn rates make growth difficult because you must acquire more new customers just to offset losses. Aim for monthly revenue churn below 5%.

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