What is the difference between MRR and revenue?

MRR only includes recurring subscription revenue, normalized to a monthly basis. Revenue may include one-time fees, services, setup charges, and usage overages. For SaaS metrics and valuation, MRR (and ARR) are preferred because they reflect predictable, repeatable income.

How do I calculate MRR from annual subscriptions?

Divide the annual subscription value by 12. A customer paying $1,200 per year contributes $100 to MRR. Do not count the full $1,200 in the month it is received. Similarly, quarterly subscriptions are divided by 3.

What are the components of MRR?

MRR is broken into four components: New MRR (from first-time customers), Expansion MRR (upgrades and add-ons from existing customers), Contraction MRR (downgrades), and Churned MRR (cancellations). Net new MRR = New + Expansion - Contraction - Churned.

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GLOSSARY

MRR (Monthly Recurring Revenue)

Monthly Recurring Revenue (MRR) is the total predictable revenue a subscription business earns each month from active customers. It normalizes annual, quarterly, and monthly subscriptions into a single monthly figure. MRR is the standard revenue metric for SaaS businesses and is tracked as new, expansion, contraction, and churned components.

Usage

Core revenue metric for subscriptions. Smooths seasonality versus cash.

Benchmarks

Track MRR by segment/plan and new/expansion/contraction/churn components monthly.

Healthy trend: steady new + expansion, declining contraction/churn as PMF improves.

Worked example

Starter: 500×$20 = $10k; Pro: 120×$120 = $14.4k; Enterprise: 8×$2,000 = $16k → MRR $40.4k.

Common pitfalls

Mixing one‑time services; counting annual prepayments as monthly; not normalizing credits.

How to show in your deck

Traction slide: MRR bridge (new/expansion/contraction/churn) for the last 3–6 months.

Deck snippet

MRR $40.4k (+13% MoM); expansion outpaces churn.

Formulas

MRR

Sum of monthly subscription revenue across all active customers

Frequently asked questions

Related terms

ARR ARPU Churn

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CAC (Customer Acquisition Cost)ARR (Annual Recurring Revenue)