Monthly Recurring Revenue (MRR)
What is MRR?
MRR is monthly recurring revenue, the normalized monthly subscription revenue base of a SaaS company.
Use MRR to explain the recurring revenue base at a specific date. A billing export is a useful starting point, but invoice totals can mix annual prepayments, taxes, credits, and implementation work. A reliable monthly review begins by normalizing subscriptions, then explaining what changed since the previous close.
Also known as: Monthly Recurring Revenue
Formula
MRR = Paying Customers × ARPA | Variable | Meaning |
|---|---|
ARPA | Average revenue per account per month. |
Paying Customers | Number of active paying customer accounts. |
How to use it
- Choose a reporting date and list active paid subscriptions. Use one policy for discounts, overdue accounts, and cancellation dates, and keep that policy beside the report.
- Convert each recurring charge to a monthly amount. Divide an annual subscription by 12; exclude setup work and other one-time charges. Sum the normalized amounts.
- Reconcile the closing balance: opening MRR plus new business, expansion and reactivation, less contraction and churn. Investigate any difference before sharing the result.
Worked example
Hypothetical worked scenario
A fictional scheduling app has 80 accounts paying $100 per month and 20 accounts paying $1,200 annually. It also invoices $3,000 for a one-time migration.
Monthly plans: 80 × $100 = $8,000. Annual plans: 20 × ($1,200 ÷ 12) = $2,000. Total MRR = $10,000.
The migration invoice increases cash or recognized revenue under the relevant accounting treatment, but contributes no MRR. The annual prepayments do not create a spike in MRR when collected.
Calculate with your numbers
MRR = Paying Customers × ARPA | Variable | Meaning |
|---|---|
ARPA | Average revenue per account per month. |
Paying Customers | Number of active paying customer accounts. |
Worked example
- Paying Customers
- 200
- ARPA (monthly)
- $250
- → MRR
- $50,000
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Open the MRR calculator for a focused view of the inputs.
What the result tells you
Compare changes within the same definition over time. If MRR rises while the number of customers falls, inspect account concentration and expansion. If new business is strong but closing MRR barely moves, inspect the losses in the revenue bridge. A total alone cannot identify either pattern.
Assumptions and common mistakes
- Multiplying customer count by ARPA is a shortcut only when ARPA is measured for that same paying account base.
- Uncommitted usage can fluctuate. State whether your report excludes it, uses a trailing average, or includes a contracted minimum.
- MRR is an operating metric. Reconcile it with billing and accounting reports rather than expecting those reports to be identical.
Check how your team defines MRR against these rules.
Choose which metrics matter for your stage, alongside MRR.
See a worked MRR reconciliation, from opening to closing MRR, with a downloadable ledger.
Compare related measures
Frequently asked questions
Does an annual payment count entirely in one month?
For MRR, spread the recurring subscription value across its service months. Track the cash receipt separately in your cash forecast.
What should I do with a discount?
Use a documented policy that reflects the recurring price the customer is actually committed to paying. Show a separate bridge when a temporary discount expires so price changes are visible.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- Stripe: Monthly recurring revenue
Definition and recurring versus nonrecurring revenue.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.