What Is Monthly Recurring Revenue (MRR)?
Normalized monthly income from subscriptions or contracted recurring fees.
Detailed Explanation
Excludes one-time charges. Investors and planners use it to value stability.
Example
100 customers at $50/month equals $5,000 MRR.
Why It Matters
Guides pricing, churn focus, and recurring invoice design.
Key facts
- Monthly Recurring Revenue (MRR) is the sum of all subscription revenue normalized to a monthly figure — the foundational metric for SaaS and subscription businesses.
- MRR = (Monthly subscriptions × monthly price) + (Annual subscriptions × annual price ÷ 12) + ... etc.
- Components of MRR change: New MRR (net new customers), Expansion MRR (upgrades), Contraction MRR (downgrades), Churn MRR (cancellations). Net New MRR = New + Expansion − Contraction − Churn.
- Top-quartile B2B SaaS companies grow MRR 10-15% month-over-month at early stage, decelerating to 4-8% at $10M+ ARR.
- Healthy MRR retention (Net Revenue Retention) is 100%+ — meaning expansion offsets churn. Best-in-class is 120%+ NRR.
How it shows up in practice
A B2B SaaS company has 480 customers at end of March 2026: 320 on $79/month plans = $25,280 MRR, 160 on $290/month plans = $46,400 MRR. Total MRR = $71,680, ARR (annualized) = $860,160. April changes: 28 new customers (+$2,800 New MRR), 15 upgrades (+$3,150 Expansion), 8 downgrades (−$1,400 Contraction), 12 churn (−$1,000 Churn). Net New MRR = +$3,550, ending MRR = $75,230, monthly growth rate = 5.0%.
Common mistakes
- Including one-time revenue (setup fees, professional services) in MRR — distorts the growth picture.
- Not separating new MRR from expansion — they have very different unit economics and operational implications.
- Calculating MRR incorrectly for annual contracts — must divide annual price by 12, not include the entire annual contract value as one month.
- Confusing MRR with ARR — ARR = MRR × 12, but they're often quoted interchangeably and lead to confusion.
- Not tracking gross vs. net MRR retention — gross retention shows churn alone; net includes expansion.
Frequently asked questions
What's the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) is the monthly normalized subscription revenue. ARR (Annual Recurring Revenue) is MRR × 12. Companies typically lead with MRR for monthly tracking and ARR for investor and high-level reporting.
Should one-time fees be included in MRR?
No — MRR is strictly recurring revenue. One-time setup fees, professional services, and overage charges should be tracked separately. Including them inflates MRR and distorts growth analysis.
How is MRR calculated for annual subscribers?
Divide annual contract value by 12. A customer paying $1,200/year contributes $100 to MRR each month, regardless of when they paid. The full $1,200 is recognized as revenue over 12 months under accrual accounting.
What's a healthy MRR growth rate?
Stage-dependent: early-stage SaaS ($0-$1M ARR) often targets 10-20% monthly growth, mid-stage ($1-10M ARR) 5-10%, growth-stage ($10M+ ARR) 3-7%. Anything sustained above 7% at scale is exceptional.
What's net dollar retention vs. gross dollar retention?
Gross dollar retention measures churn alone (% of starting MRR retained, ignoring expansion). Net dollar retention includes expansion (upgrades) and contraction. Net >100% means you're growing from existing customers even before new sales.
Related Resources
Last verified: May 2026
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