Monthly Recurring Revenue (MRR)
The predictable, normalized monthly revenue from all active subscriptions in a SaaS business.
Monthly Recurring Revenue (MRR) is the total predictable revenue a subscription business earns each month from all active customers. It normalizes different billing cycles (monthly, quarterly, annual) into a single monthly figure, making it the primary revenue metric for SaaS companies.
MRR is calculated by multiplying the total number of paying customers by the average revenue per account. A company with 200 customers paying an average of $50/month has $10,000 MRR. Annual subscriptions are divided by 12 — a $600/year plan contributes $50 to MRR.
SaaS companies track several MRR components: New MRR (from new customers), Expansion MRR (from upgrades and add-ons), Contraction MRR (from downgrades), and Churned MRR (from cancellations). Net New MRR equals New + Expansion - Contraction - Churned. Positive net new MRR indicates growth.
For businesses focused on social proof and testimonials, MRR growth often correlates with trust-building activities. Companies that prominently display customer testimonials on pricing pages see higher conversion rates from free to paid plans. Video testimonials are particularly effective at reducing hesitation during the purchase decision. Tracking MRR alongside testimonial placement can reveal the direct revenue impact of social proof strategies, giving marketing teams concrete data to justify investment in testimonial collection programs.
Frequently Asked Questions
What is the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) measures predictable revenue on a monthly basis, while ARR (Annual Recurring Revenue) is simply MRR multiplied by 12. MRR is typically used for month-to-month tracking and operational decisions, while ARR is preferred for annual planning, fundraising, and communicating business scale. Enterprise SaaS companies with annual contracts tend to emphasize ARR, while SMB-focused products often focus on MRR.
How do one-time fees affect MRR calculations?
One-time fees like setup charges, implementation fees, or professional services are excluded from MRR because they are not recurring. MRR should only include predictable, subscription-based revenue. Including one-time fees inflates the metric and misrepresents the health of recurring revenue streams. These non-recurring revenues are tracked separately and contribute to total revenue but not to MRR or ARR calculations.
Related Articles
Build trust.
Drive revenue.
Join thousands of businesses using VideoTestimonials to build trust and accelerate growth.