Monthly recurring revenue adds up what every active subscription pays per month. A customer on an annual plan counts as one twelfth of that plan each month. One-off charges such as setup fees, services or usage spikes that will not repeat are kept out, so the number shows the steady base of the business rather than a lucky month.
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What moves MRR
MRR changes in four ways, and tracking them separately shows where growth really comes from.
- New MRR from customers who just signed up
- Expansion MRR from existing customers who upgrade or add seats
- Contraction MRR from customers who downgrade
- Churned MRR from customers who cancel
How SEO connects to it
Organic search feeds the new MRR line. The useful question is not how many visitors a page earns but how much recurring revenue the signups from it produce, which means tying landing-page visits to paid subscriptions in your analytics and billing data.
Example
A month of movement
A fictional scheduling tool, Slotwell, starts the month at a set MRR. It adds new customers from search and a few upgrades, loses two accounts and sees one downgrade. Reading the four lines side by side shows whether the month grew from acquisition or from existing customers, which is a different problem to fix.
Common mistakes
Counting one-off fees
Setup fees and one-time services inflate MRR and make the following month look like a drop.
Quoting MRR without the movements
A flat total can hide strong new sales cancelled out by heavy churn.
Frequently Asked Questions
ARR is the annualised version of the same idea. Teams on mostly monthly plans tend to talk in MRR, and teams on annual contracts in ARR.
No. Revenue counts once a customer is paying on a recurring plan.
Keep reading
- ARR (Annual Recurring Revenue): ARR is the yearly value of a SaaS company's recurring subscriptions, the figure investors and buyers use to size the business.
- Net Revenue Retention: The share of recurring revenue kept from an existing customer group over a period, including expansion, after downgrades and churn. Above 100% means growth.
- Expansion Revenue: Additional recurring revenue from existing customers through upgrades, extra seats, add-ons or higher usage. The main driver of net revenue retention.
- Gross Revenue Retention: The share of recurring revenue kept from existing customers over a period, counting only losses from churn and downgrades. It can never exceed 100%.
- Acquisition Channel: A route through which a company finds new customers, such as organic search, paid ads, referrals, partners or outbound sales. Each has its own costs and limits.
- Annual Recurring Revenue: The yearly value of a SaaS company's active subscription contracts, excluding one-off fees. The headline size metric for most subscription businesses.
- Average Contract Value: The average annual value of a customer contract, excluding one-off fees. It shapes which sales motion and acquisition channels a SaaS company can afford.
- Average revenue per account: Average revenue per account is recurring revenue divided by the number of paying accounts.
