MRR stands for monthly recurring revenue: the predictable revenue a subscription business collects each month from its active customers. You calculate it by normalizing every subscription, whether billed monthly, quarterly, or annually, into a single monthly figure. MRR is the standard revenue metric for SaaS companies and is usually broken into new, expansion, contraction, and churned components so you can see where growth is actually coming from.
MRR gives investors a clean, comparable revenue number that strips out one-time fees and lumpy annual prepayments. Two companies with the same cash in the bank this month can have very different MRR, and MRR is the better predictor of next month's revenue.
Because MRR splits into new, expansion, contraction, and churned revenue, it lets investors see the shape of your growth. Growth driven mostly by new logos carries different risk than growth driven by expansion inside an existing base, even when the total looks the same.
Add up the monthly value of every active subscription. For a customer paying annually, divide the annual contract value by 12 and count that as their monthly contribution. For a customer paying quarterly, divide by 3.
Do not include one-time setup fees, professional services, or usage overages that are not part of a recurring commitment. Net out discounts and credits so MRR reflects what a customer is actually paying each month rather than the list price.
Say you run three plans. Starter: 500 customers at $20 per month equals $10,000. Pro: 120 customers at $120 per month equals $14,400. Enterprise: 8 customers at $2,000 per month equals $16,000. Total MRR equals $10,000 plus $14,400 plus $16,000, or $40,400.
If 20 of those Enterprise customers actually pay $24,000 per year rather than month to month, you would divide $24,000 by 12 and add $2,000 per customer to MRR, rather than booking the full annual amount in the month it lands in your bank account.
New MRR comes from first-time paying customers in the period. Expansion MRR comes from upgrades, seat additions, or add-ons purchased by existing customers. Contraction MRR is revenue lost to downgrades. Churned MRR is revenue lost to cancellations.
Net new MRR equals New plus Expansion minus Contraction minus Churned. Tracking these four lines separately, rather than just the total, is what lets you and investors tell a healthy growth story apart from a fragile one.
At pre-seed, MRR is often near zero or in the low thousands, and investors look for signal in usage and early paying pilots rather than the absolute number. At seed, most investors want to see MRR growing 10 to 20 percent month over month with a visible mix of new and expansion revenue. By Series A, the expectation shifts toward MRR in the hundreds of thousands with steadier, less spiky growth.
Mixing in one-time services revenue or hardware sales, which inflates MRR and gets flagged the moment an investor asks for a revenue breakdown.
Booking annual prepayments as MRR in the month the cash arrives instead of spreading them across the contract term.
Not separating the four components, so a month of flat total MRR hides that you gained a lot of new business while losing a lot to churn.
On your traction slide, show an MRR bridge for the last three to six months: new, expansion, contraction, and churn, ending at total MRR. State the month-over-month growth rate next to the number, for example MRR $40,400, up 13 percent month over month, with expansion outpacing churn.
Looking for investors?
Browse 1,500+ investors filtered by stage, sector, country, and check size.
Explore the investor directory