Formula
How to Calculate MRR
Monthly Recurring Revenue — the total predictable subscription revenue a company earns each month. The month-by-month building block of ARR and the most closely tracked revenue metric for early-stage SaaS.
Monthly Recurring Revenue
MRR = Σ Monthly Recurring Revenue from All Active Subscribers
Where
- MRR
- = Sum of all recurring subscription revenue in a month
What Is MRR?
Monthly Recurring Revenue (MRR) is the total predictable, recurring revenue a subscription business generates each month from active customers. It is the real-time operational metric from which ARR is derived (ARR = MRR × 12). MRR is tracked in four components: New MRR (from new customers), Expansion MRR (from existing customers upgrading or expanding), Contraction MRR (from downgrades), and Churned MRR (from cancellations). Net MRR change = New + Expansion - Contraction - Churned. MRR is the most actionable metric for early-stage SaaS founders because it shows monthly momentum. ARR is the annual summary; MRR is the heartbeat.
Worked Example
A startup begins January with $50K MRR. In January: adds $12K New MRR (new customers), $5K Expansion MRR (upgrades), loses $3K Contraction MRR (downgrades) and $4K Churned MRR (cancellations). Net new MRR = $12K + $5K - $3K - $4K = $10K. February starting MRR = $60K. ARR at the start of February = $60K × 12 = $720K.
Why MRR Matters
MRR is the primary growth metric for early-stage SaaS. Tracking MRR by component (new, expansion, contraction, churn) reveals the health of the business: high expansion and low churn indicate strong product-market fit; high churn and negative expansion signal customers aren't getting value. Monthly MRR charts should be a core part of any investor update.
Related Terms
Frequently Asked Questions
How do you calculate MRR?
MRR is calculated using the formula: MRR = Σ Monthly Recurring Revenue from All Active Subscribers. Monthly Recurring Revenue — the total predictable subscription revenue a company earns each month. The month-by-month building block of ARR and the most closely tracked revenue metric for early-stage SaaS.
What is a good MRR?
What constitutes a "good" MRR depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.