Skip to content
Log in
← Glossary

MRR (monthly recurring revenue)

Also called: monthly recurring revenue

The subscription revenue a business can expect every month from its current customers. Annual plans count as their price divided by 12; one-off payments are left out.

MRR (monthly recurring revenue) is the subscription revenue a business can count on every month from its current customers. Add up what each active customer pays per month; annual plans count as their price divided by 12. One-off fees, setup charges and payments that won't repeat are left out.

MRR is the heartbeat of a subscription business because it moves in pieces you can explain. Each month, new MRR comes from new customers, expansion MRR from customers who pay more, contraction MRR from customers who pay less, and churned MRR from customers who leave. End-of-month MRR = starting MRR + new + expansion − contraction − churned. Tracking the pieces shows whether growth comes from selling, from keeping customers, or from both.

MRR is not the same as cash in the bank. A yearly customer pays twelve months up front but adds only one twelfth of that to MRR, and a failed card payment may still sit in MRR until you decide the customer is gone. Keep both numbers: MRR for the health of the business, cash for paying the bills.

Example

On 1 October GarageDesk has 50 shops on the monthly plan (600 UAH) and 8 on the yearly plan (6,000 UAH a year, so 500 UAH a month): MRR = 50 × 600 + 8 × 500 = 30,000 + 4,000 = 34,000 UAH.

In October 9 shops join, 7 monthly and 2 yearly: new MRR = 7 × 600 + 2 × 500 = 5,200 UAH. Three monthly shops leave: churned MRR = 3 × 600 = 1,800 UAH. On 31 October MRR = 34,000 + 5,200 − 1,800 = 37,400 UAH, from 58 + 9 − 3 = 64 shops.

Common mistakes

  • Counting an annual payment as one month's MRR. A 6,000 UAH yearly plan adds 500 UAH, not 6,000.
  • Including one-off fees. Setup charges and one-time services inflate MRR and vanish next month.
  • Reporting only the total. A flat MRR can hide strong sales cancelled out by heavy churn.
  • Keeping failed payments forever. Decide when an unpaid customer counts as churned, and apply the rule every month.

Learn it in the course

  • MRR calculation and monthly churn · MRR calculation when some customers pay for a year, plus new and lost MRR, monthly churn rate and revenue churn, on one real month of GarageDesk.
  • Revenue concentration: one customer too big · A franchise of 40 shops wants a special price, custom work and its own branding. Compute the revenue concentration it would create, and answer in a way that keeps the product yours. Ends with the module case.
  • How much is the business worth? · How much is my business worth? ARR, yearly owner earnings and a multiple: how to turn a small subscription business's numbers into a price range, what moves the multiple, and how an offer compares.
  • How to sell a business: the deal · How to sell a business, step by step: the letter of intent, checking the buyer, six weeks of due diligence and an earn-out, on GarageDesk's sale. Ends with the final case of the course.
  • A yearly plan from day one · Monthly and yearly plans side by side: the discount, the cash up front, how a yearly customer counts in monthly revenue, and what it does to the runway.