What is MRR? Monthly Recurring Revenue Explained for SaaS
What is MRR? Monthly Recurring Revenue Explained for SaaS
If there is one metric every SaaS founder, operator, and investor tracks above all others, it is MRR — Monthly Recurring Revenue. It is the clearest real-time signal of business health, growth momentum, and predictability. Understanding it deeply is the starting point for every other SaaS metric.
MRR Definition
Monthly Recurring Revenue (MRR) is the total predictable revenue your SaaS business generates from all active subscriptions in a given month. It excludes one-time payments, setup fees, professional services, and any non-recurring charges. MRR captures only the stable, repeating revenue that defines a subscription business.
MRR Formula
MRR = Number of Active Customers × Average Monthly Subscription Price
For a more precise calculation across multiple pricing plans, sum the monthly subscription value of every individual active paying customer. This handles mixed plan pricing more accurately than using an average.
MRR Example
A SaaS company has 150 customers on a $29/month plan, 80 customers on a $79/month plan, and 20 customers on a $199/month plan. MRR = (150 × $29) + (80 × $79) + (20 × $199) = $4,350 + $6,320 + $3,980 = $14,650 MRR.
Use our MRR Calculator to calculate your MRR instantly. To convert to an annual view, use the ARR Calculator.
The Five Components of MRR
New MRR is revenue from brand new customers acquired this month. Expansion MRR is additional revenue from existing customers who upgraded or purchased add-ons. Churned MRR is revenue lost from customers who cancelled. Contraction MRR is revenue lost from customers who downgraded to a lower plan. Net New MRR is the net of all these movements — it is your month-over-month MRR change and the truest measure of growth momentum.
What Counts as MRR and What Does Not
Monthly subscription fees count. Annual subscriptions divided by 12 count. Predictable usage-based charges that recur monthly count. What does not count: one-time setup or onboarding fees, professional services, non-recurring add-on purchases, and refunds or credits.
MRR Benchmarks for SaaS
Early-stage milestones: $1K MRR proves someone will pay. $10K MRR signals real early traction. $83K MRR equals $1M ARR — a key fundraising benchmark. For growth, early-stage SaaS should target 10–20% month-over-month MRR growth. See What is SaaS Growth Rate for benchmarks by stage.
MRR vs ARR
MRR is the operational heartbeat — tracked daily and monthly. ARR (Annual Recurring Revenue) is MRR multiplied by 12 and used for investor conversations, valuations, and year-over-year comparisons. See the full breakdown in MRR vs ARR.
How MRR Connects to Other Metrics
MRR divided by your customer count gives you ARPU. ARPU multiplied by average customer lifespan gives you LTV. Tracking MRR month over month gives you Growth Rate. Monitoring churned MRR as a percentage of starting MRR gives you revenue churn — related to Churn Rate. MRR is the foundation of your entire SaaS metrics stack. See the full picture in the SaaS Metrics Guide.
How to Grow MRR
MRR grows through three levers: acquiring more customers (increases New MRR), reducing cancellations (decreases Churned MRR), and selling more to existing customers (increases Expansion MRR). The most capital-efficient path is improving retention — a 1% monthly churn reduction adds more long-term MRR than most acquisition campaigns. Read about Expansion Revenue and Net Revenue Retention to understand the full picture.
Frequently Asked Questions
Should I use MRR or ARR? Use MRR for day-to-day operations and monthly reporting. Use ARR when talking to investors, in board decks, and for year-over-year comparisons. Both matter — they serve different audiences and time horizons.
How do I handle annual plan customers in MRR? Divide the annual contract value by 12 to get their monthly MRR contribution. A customer on a $1,200/year plan contributes $100/month to MRR.
What is a good MRR growth rate? For early-stage SaaS (under $1M ARR), 15–20% monthly growth is exceptional. For growth-stage ($1M–$10M ARR), 10–15% monthly is strong. As you scale, the absolute dollar amount of new MRR matters more than the percentage.