Monthly Recurring Revenue (MRR) is The predictable monthly revenue from all active subscriptions, normalized to a monthly amount. The foundational metric for SaaS financial health and growth tracking.
MRR is your subscription revenue heartbeat. It strips out one-time charges, professional services, and usage overages to show the predictable, recurring portion of revenue. For early and growth-stage SaaS companies, MRR is the metric that matters most because it's the clearest signal of business momentum.
MRR Components
New MRR: Revenue from brand-new customers acquired this month
Contraction MRR: Revenue lost from downgrades within existing accounts
Churn MRR: Revenue lost from customers who cancelled entirely
Net New MRR: New + Expansion - Contraction - Churn. The number that tells the real growth story.
MRR vs Revenue
MRR and GAAP revenue aren't the same thing. A $120K annual contract recognized over 12 months is $10K/month in both MRR and revenue. But a $50K implementation fee recognized over the contract period adds to revenue without touching MRR. RevOps needs to track both, but MRR is the operating metric that drives day-to-day decisions.
MRR × 12 gives you a rough ARR, but see ARR for why the relationship isn't always that simple. For MRR's role in retention analysis, see Net Revenue Retention and ACV.
Frequently Asked Questions
How do you calculate MRR from annual contracts?
Divide the annual contract value by 12. A $60K annual contract contributes $5K MRR. Don't include one-time fees like implementation or setup charges in the calculation.
What's the difference between MRR and ARR?
MRR is the monthly figure; ARR is the annualized figure (roughly MRR × 12). MRR is better for tracking month-to-month momentum. ARR is better for board reporting, benchmarking, and valuation discussions. Early-stage companies tend to focus on MRR; later-stage companies report ARR.
