Metrics & Performance
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) 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.
In Practice
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 It 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.
VC Beast Take
The most dangerous MRR mistake is mixing recurring and non-recurring revenue. A consulting fee, a one-time implementation charge, or a prepaid annual contract shouldn't be included in MRR if it won't repeat. Investors will scrutinize this. The second most common mistake: counting 'committed' revenue (signed contracts that haven't started) as current MRR. Don't do it.