Definition
MRR (Monthly Recurring Revenue) is the recurring revenue you expect from active subscriptions in a month. It's the standard momentum metric for subscription businesses.
What to include (and exclude)
- Recurring subscription charges (normalized to monthly).
- Exclude one-time fees, services, setup, and usage spikes that are not recurring.
- For annual plans, count monthly equivalent (annual price / 12).
MRR movement breakdown (the waterfall)
- New MRR, Expansion MRR, Contraction MRR, Churned MRR.
- Net new MRR = new + expansion - contraction - churn.
- Ending MRR = starting MRR + net new MRR (reconciliation).
MRR vs ARR
- MRR is monthly run-rate; ARR is the same run-rate annualized (usually MRR * 12).
- Use MRR for monthly momentum and decomposition; use ARR for scale and many efficiency metrics (burn multiple, magic number).
- Both are run-rate snapshots, not recognized revenue.
MRR growth rate
- MRR growth (period) = (end MRR - start MRR) / start MRR.
- Use CMGR to compare growth across different time horizons.
- If you don't know what drove growth, use an MRR waterfall (new vs expansion vs churn).
Common mistakes
- Mixing MRR with bookings, billings, cash receipts, or recognized revenue (different timing).
- Changing the MRR definition month-to-month (breaks trends).
- Using blended MRR movements without segmenting by plan or customer size.