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What is Monthly Recurring Revenue (MRR) in Business?
Monthly Recurring Revenue (MRR) is the predictable revenue a business expects to receive every month from active subscriptions.
MRR gives SaaS and subscription businesses a consistent way to measure recurring revenue, track growth and understand how changes in their customer base affect revenue over time.
How is MRR calculated?
MRR is calculated by adding the recurring monthly revenue generated by all active customers. One simple formula is:
MRR = Number of customers × Average recurring revenue per customer per month
For example, if a SaaS company has 200 customers paying an average of $150 per month:
200 × $150 = $30,000 MRR
The company’s Monthly Recurring Revenue is $30,000.
For quarterly or annual subscriptions, normalize the contract value to a monthly amount before including it in MRR. One-time fees, professional services and other non-recurring revenue should generally be excluded.
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How is MRR used by SaaS companies?
What are the different types of MRR?
Understanding how MRR changes is just as important as tracking the total. SaaS finance teams typically break MRR movement into four categories:
- New MRR: Recurring revenue added from new customers.
- Expansion MRR: Additional recurring revenue from existing customers through upgrades, additional users or higher-value plans.
- Contraction MRR: Recurring revenue lost when existing customers downgrade or reduce their subscriptions.
- Churned MRR: Recurring revenue lost when customers cancel their subscriptions completely.
Together, these movements show what is driving changes in recurring revenue and help finance teams distinguish new business growth from expansion, contraction and customer churn.
What is a good result?
A high MRR and a steadily increasing MRR are positive indicators of business performance.
The most common MRR benchmark is MRR Growth Rate, or the annual increase in MRR. MRR Growth Rate is one of the most important SaaS growth metrics.
A good result is driven by two factors: your target customer market and the size of your own company. To fully understand the benchmarks for your company, it is worth having a look at our more detailed article on the 2022 benchmarks.
What are 2021 and 2022 MRR benchmarks?
The table below shows MRR growth rate benchmarks over the last three years, from 2020 to 2022. To read the table, start by identifying annual revenue for your company in the left column.
The row of data that follows shows the average, lower quarter and top quartile results.
As an example, for companies with up to $10M of revenue, in 2022, the average MRR Growth Rate in 2022 was 50%. The lowest quartile of companies had a 30% growth rate, while the top quartile had 115%.
There are several interesting items to note:
- MRR Growth rates vary significantly by company size. Smaller companies grow faster.
- 2021 was strongly skewed by COVID-19. In 2022, average MRR Growth rates are similar to 2020 for companies of all sizes except $10-$20M where growth rates continue to increase.
There is a vast difference between top quartile and lower quartile performance in all years and for companies of all sizes. In 2023, we expect this gap to shrink. For details on why, have a look at our more detailed article on the 2022 benchmarks.
This data is compiled by Openview VC and includes 600 companies from pre-revenue to £100M ARR, globally. All companies in the survey have VC funding so may have higher growth rates than bootstrapped SaaS businesses.
MRR Visualisation Example
ScaleXP is the leading SaaS finance tool, able to provide a full suite of SaaS metrics, automatically calculated each month. The system connects to and imports data from both your accounting (Xero or NetSuite) and CRM (HubSpot or Salesforce) systems. As data is imported, a series of smart algorithms prepare a revenue recognition schedule and from this, graphs such as these which show both MRR and MRR Growth rate, split into New MRR, Lost, Upgrades and Downgrades.
To read more about how the system can automate your SaaS metrics, click here .
You may also be interested in
ARR
Predictable revenue that a company can expect to receive on an annual basis from its subscription-based products or services.
Revenue Growth Rate
Percentage increase in revenue over a certain period of time, most typically a quarter or a year.
CMRR
A forward-looking view of MRR, usually MRR plus new bookings less churn.
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Monthly Recurring Revenue FAQs
MRR stands for Monthly Recurring Revenue. It is the predictable recurring revenue a business expects to receive each month from active subscriptions.
MRR is commonly used by SaaS and subscription businesses to measure recurring revenue performance and track growth over time.
Calculate MRR by adding the monthly recurring revenue from all active subscriptions.
For example, if 200 customers each generate an average of $150 in recurring monthly revenue:
200 × $150 = $30,000 MRR
Annual and quarterly subscriptions should be converted to their monthly equivalent before being included.
MRR measures recurring revenue on a monthly basis, while ARR measures recurring revenue on an annual basis.
For a business with stable recurring subscriptions, ARR can generally be calculated as:
ARR = MRR × 12
For example, $30,000 in MRR would equate to $360,000 in ARR.
A good MRR growth rate depends on the company’s size, maturity and market. Early-stage SaaS companies can typically grow much faster than larger, more established businesses, so MRR growth should be compared with businesses at a similar stage.
Rather than looking at MRR growth alone, finance teams should also understand what is driving it, including New MRR, Expansion MRR, Contraction MRR and Churned MRR.