MRR (Monthly Recurring Revenue)

Monthly Recurring Revenue (MRR) is the total predictable revenue your business generates each month from subscription or recurring billing arrangements. It's the heartbeat metric of any SaaS or subscription business — the number that tells you how much money you can reliably count on every 30 days.

MRR is calculated by summing up the monthly value of all active subscriptions. If you have 100 customers paying $50/month and 50 customers paying $200/month, your MRR is $15,000. Simple. But MRR gets more nuanced when you break it into components: new MRR (from new customers), expansion MRR (from upgrades and upsells), contraction MRR (from downgrades), and churned MRR (from cancellations). Net new MRR = new + expansion - contraction - churned.

Importantly, MRR only counts recurring revenue. One-time setup fees, consulting projects, and implementation charges don't count — they're not predictable and won't repeat next month. Annual contracts should be divided by 12 to get their monthly contribution. If a customer prepays $1,200 for a year, that's $100/month in MRR. This normalization is what makes MRR useful for comparing periods, calculating growth rates, and forecasting future revenue.

MRR is the single most important number investors look at when evaluating a SaaS startup. It shows your revenue baseline, your growth trajectory (month-over-month MRR growth rate), and the health of your business (are you adding more than you're losing?). A SaaS startup growing MRR at 15-20% month-over-month is in strong territory for fundraising. Flat or declining MRR is a red flag. Understanding MRR components helps you diagnose problems: high churn eating your new sales? Expansion revenue not materializing? MRR tells the story.