What is the Monthly Recurring Revenue (MRR)?
MRR stands for Monthly Recurring Revenue. It is a measure of the predictable revenue that a company can expect to receive on a monthly basis from its subscription-based products or services.
How is MRR calculated?
MRR is calculated by adding all recurring revenue for a single month. The calculation simply requires classifying each revenue stream as recurring and non-recurring.
Recurring revenue refers to the predictable, ongoing income that a company receives regularly. It is most typically a monthly, quarterly or yearly subscription. Non-recurring revenue, on the other hand, is revenue that is not expected to continue regularly such as one-time product or service.
How is MRR used by SaaS companies?
MRR is a critical metric to track the performance of SaaS companies. It is used to assess the quantity and percentage of predictable revenue and a critical indicator of growth. Understanding recurring revenue is also critical to budgeting and forecasting.
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
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.
A forward-looking view of MRR, usually MRR plus new bookings less churn.
SAAS METRICS LIBRARY
Read about more SaaS metrics, from ARR to Rule of 40.