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MRR

What is MRR?​

What is MRR and why is it important?

If your business relies on some kind of recurring payment or subscription model, MRR is absolutely one of the most important metrics you can measure for your business.

What is MRR?​

MRR or Monthly Recurring Revenue is a measurement of how much revenue you're earning in a given month and how much you can expect to earn in future months.

Is MRR Important?​

In short, MRR is one of the most important metrics you can track with your business.

MRR is a simple metric that gives you a huge amount of information. You can use MRR to measure your business' financial health and can also be used to help you predict where your business is headed.

How Do You Calculate MRR?​

MRR is a very simple formula that any could use on their own. Pick a month and simply add up all of the recurring revenue generated by customers for that month.

For example, if you had a monthly subscription cost of $100 and 3 customers in January, your MRR would be $300. Let's say we added a new customer in February, the MRR would increase to $400.

January - $100 + $100 + $100 = $300 MRR
February - $100 + $100 + $100 + $100 = $400 MRR
March - $100 + $100 + $100 + $100 = $400 MRR

Now let's say down the road, after tracking and utilizing your MRR data, you've started offering a yearly plan. The customer pays $1200/yr. Simply take that yearly amount and divide it by 12. In this example, you've added another $100 to your MRR.

March - $100 + $100 + $100 + $100 = $400 MRR
April - $100 ($1,200/12) + $400 = $500 MRR

Ready to learn more? Request a demo to schedule a demo call with our team to go over MRR.

Common Questions About MRR​

How do deleted or inactive customers impact MRR?​

  • MRR is always based on invoices, so whether the customer is active or not will have no impact on MRR
  • If you delete a customer, their MRR will remain in the reporting for historical purposes.

How is New MRR calculated?​

  • New MRR is new revenue from a customer that has previously never had any MRR
  • New MRR is recognized in the month their first invoice is dated

note

If the customer previously had a subscription, canceled, and then came back they would be considered Reactivation MRR.

How is Expansion MRR calculated?​

  • Expansion MRR is revenue from a customer who had less revenue the month prior. Last month they were invoiced $100. Next month, they're invoiced $150. Your expansion MRR for the month would be $50.
  • Common scenarios you'd see expansion MRR are if you increase the rate on a line item, add a new line item, or add a new subscription (in addition to any others).

How is Reactivation MRR calculated?​

  • Reactivation MRR is revenue from a customer that previously had revenue after churning or stopped having revenue previously.
  • If the customer cancels/suspends their subscription and reactivates it within the same month, there is no change to the MRR classification.

How is Contraction MRR calculated?Contraction MRR is revenue from a customer who had more revenue the month prior.

Example - Let's say your customer decides to downgrade their subscription to plan with a lower rate from $150 to $100. Next month, the MRR for that subscription will be calculated as Contraction MRR.

How is Churn MRR calculated?​

  • Churn MRR happens when someone no longer has any recurring revenue.
  • This can happen when a customer cancels their subscription or lets their next billing period go more than 1 month past the last invoice date.
  • It's important to note that it won't be recorded as Churn until the following month it's canceled. For example, let's imagine the customer has a subscription that's set to run on March 15th. They then decide to cancel on March 17th. The MRR report will not record it as churn until April.
note

Churn only happens when there is no recurring revenue, not the exact moment something is cancelled.

How is the current MRR column/value for a Subscription calculated?​

You can add a column to your Subscriptions dashboard for MRR data.

The MRR of a subscripiton is the MRR from the latest invoice.

Cancelled subscriptions will have a MRR at $0.00

If the subscription has not generated invoices, then it's MRR is $0.00. This is because the subscription has not contributed any MRR yet. No invoices, no MRR.

If the subscription is upgraded or downgraded, the MRR will not update until the next invoice is created. This is because the previous invoice has already contributed MRR for the period of the previous invoice date until 30 days later.

How is the MRR column/value for a Customer calculated?​

You can add a column to your Customers dashboard for MRR data.

The MRR of a customer is the MRR from the latest invoice.

Does tax / VAT factor into MRR?​

Tax / VAT amounts are not included in MRR.

Do setup fees or one-time fees factor into MRR?​

Setup fees / one-time fees / one-time discounts / etc. are not included in MRR.

MRR Glossary​

Churn MRR - subscriptions that were cancelled that month

Contraction MRR - subscription that decreased in value that month (e.g. the customer downgraded)

Expansion MRR - subscriptions that increased in value that month (e.g. the customer upgraded)

New MRR - invoiced $$$ from new subscriptions in that month