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MRR (monthly recurring revenue)

Also called: monthly recurring revenue

The subscription revenue a business can expect every month from its current customers. Annual plans count as their price divided by 12; one-off payments are left out.

MRR (monthly recurring revenue) is the subscription revenue a business can count on every month from its current customers. Add up what each active customer pays per month; annual plans count as their price divided by 12. One-off fees, setup charges and payments that won't repeat are left out.

MRR is the heartbeat of a subscription business because it moves in pieces you can explain. Each month, new MRR comes from new customers, expansion MRR from customers who pay more, contraction MRR from customers who pay less, and churned MRR from customers who leave. End-of-month MRR = starting MRR + new + expansion − contraction − churned. Tracking the pieces shows whether growth comes from selling, from keeping customers, or from both.

MRR is not the same as cash in the bank. A yearly customer pays twelve months up front but adds only one twelfth of that to MRR, and a failed card payment may still sit in MRR until you decide the customer is gone. Keep both numbers: MRR for the health of the business, cash for paying the bills.

Example

On 1 October GarageDesk has 50 shops on the monthly plan (600 UAH) and 8 on the yearly plan (6,000 UAH a year, so 500 UAH a month): MRR = 50 × 600 + 8 × 500 = 30,000 + 4,000 = 34,000 UAH.

In October 9 shops join, 7 monthly and 2 yearly: new MRR = 7 × 600 + 2 × 500 = 5,200 UAH. Three monthly shops leave: churned MRR = 3 × 600 = 1,800 UAH. On 31 October MRR = 34,000 + 5,200 − 1,800 = 37,400 UAH, from 58 + 9 − 3 = 64 shops.

Common mistakes

  • Counting an annual payment as one month's MRR. A 6,000 UAH yearly plan adds 500 UAH, not 6,000.
  • Including one-off fees. Setup charges and one-time services inflate MRR and vanish next month.
  • Reporting only the total. A flat MRR can hide strong sales cancelled out by heavy churn.
  • Keeping failed payments forever. Decide when an unpaid customer counts as churned, and apply the rule every month.