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Monthly Recurring Revenue (MRR) is the current monthly value of predictable and repeatable income from customers with active subscriptions, exclusive of one-time payments or fees.
MRR reflects the health of your core business and is the North Star metric for many companies. It's mainly used for growth tracking, forecasting, and valuation. MRR can also assist in gauging the impact of customer acquisition and churn.
Total Number of Customers x Average MRR per Customer
To calculate MRR, multiply the total number of customers by the average MRR per customer.
Ensure MRR is calculated consistently. Include recurring charges but exclude one-time fees, discounts, and credits. Break down MRR into meaningful segments, such as by product, customer type, or region. This can reveal growth levers and insights into which areas are performing well and which need attention.
A common mistake is confusing MRR with cash flow; MRR focuses solely on revenue due, not cash received. Another is neglecting the impact of downgrades or churn on MRR. It is not just a tally of positive revenue activities but a net figure showing the actual growth trajectory.
