What is Monthly Recurring Revenue (MRR)?

Monthly Recurring Revenue (MRR) is revenue that a company expects from customers each month for providing  subscription-based services or ongoing contracts. It's a key metric used by B2B businesses, especially in SaaS and other subscription models, to measure financial health and growth potential.

MRR focuses only on recurring revenue streams, excluding one-time payments or variable fees, making it an essential indicator of long-term stability.

How is MRR Calculated?

MRR is calculated by multiplying the total number of active subscriptions by the average revenue per user (ARPU) for a month.

Formula:

MRR=Total Subscribers×ARPU

Example:

If a SaaS business has 100 customers, each paying $50 per month, the MRR would be:

100×50=$5,000 MRR

Why is MRR Important for SaaS Businesses?

1.MRR provides a consistent and predictable income, helping businesses plan budgets and allocate resources effectively.

2.Tracking MRR trends helps companies understand their growth trajectory and identify opportunities to scale.

3.MRR helps monitor the financial impact of customer churn, enabling businesses to take proactive steps to retain clients.

4.MRR is a crucial metric for investors assessing the financial stability and scalability of a business.