Monthly Recurring Revenue (MRR) is the predictable revenue a SaaS business generates each month from active subscriptions. MRR normalizes revenue across different billing cycles (monthly, annual, multi-year) to give a consistent view of business health and growth trajectory.
MRR = Number of active customers × Average revenue per customer per month
For annual plans, divide the annual contract value by 12 to get the monthly contribution.
Monthly Recurring Revenue is the single most important metric for SaaS businesses. It represents the normalized monthly revenue from all active subscriptions, regardless of billing cycle. MRR gives founders, investors, and operators a consistent baseline to measure growth, set targets, and model the business.
New MRR is revenue from new customers. Expansion MRR is additional revenue from existing customers who upgrade. Churned MRR is revenue lost from cancellations. Reactivation MRR is revenue from returning customers. Net New MRR = New MRR + Expansion MRR − Churned MRR. Tracking all components reveals whether growth is coming from acquisition or expansion, and how much is being lost to churn.
ARR (Annual Recurring Revenue) is simply MRR × 12. ARR is typically used for enterprise SaaS companies with annual contracts, while MRR is the primary metric for subscription businesses with monthly billing. Both measure the same thing at different time horizons — use whichever aligns with your billing cycle and reporting needs.
| Level | MRR Score |
|---|---|
| Good MoM growth (early) | 15–20% |
| Good MoM growth (growth) | 5–10% |
| Good MoM growth (mature) | 2–5% |
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