Monthly Recurring Revenue (MRR)

What is Monthly Recurring Revenue (MRR)?

Monthly Recurring Revenue (MRR) is the predictable revenue a SaaS company expects to receive every month from active subscriptions. It represents the normalized monthly value of all recurring subscription revenue, excluding one-time fees, usage-based charges, and professional services.

MRR is the foundational metric for subscription-based businesses, providing a clear view of business health, growth trajectory, and revenue predictability. Unlike traditional revenue recognition that can fluctuate based on annual payments or one-time sales, MRR normalizes all subscription contracts to a monthly value, making it easier to track month-over-month growth and forecast future revenue.

For B2B SaaS companies, MRR serves as the primary indicator of business momentum. It reflects not just new customer acquisition, but also the impact of expansion revenue from existing customers, the loss from churned accounts, and the reduction from downgrades. This comprehensive view makes MRR essential for go-to-market teams evaluating campaign effectiveness, sales teams measuring quota attainment, and executives assessing company valuation. Because subscription revenue compounds over time, small improvements in MRR growth rates can dramatically impact long-term business value, making it the most watched metric in SaaS boardrooms.

Key Takeaways

• Core SaaS Metric: MRR is the most fundamental metric for subscription businesses, representing predictable monthly revenue from all active subscriptions

• Growth Indicator: MRR growth rate is the primary measure of business momentum, combining new customer acquisition, expansion, and churn impacts

• Forecasting Foundation: MRR enables accurate revenue forecasting and supports data-driven decisions about sales capacity, marketing investment, and product development

• Valuation Driver: Company valuation for SaaS businesses is typically calculated as a multiple of ARR (Annual Recurring Revenue), which is MRR × 12

• Segmented Analysis: Breaking MRR into components (New, Expansion, Churned, Net) provides actionable insights for different go-to-market strategies

How It Works

MRR calculation starts with identifying all active subscription customers and normalizing their contract values to a monthly amount. For annual contracts, divide the total contract value by 12. For quarterly contracts, divide by 3. The sum of all normalized monthly subscription values equals your MRR.

The real power of MRR comes from tracking its components and movements month over month:

New MRR represents revenue from customers who started their subscription in the current month. This measures the effectiveness of your acquisition channels and sales team's ability to close new business.

Expansion MRR captures additional revenue from existing customers who upgraded their plans, added users, or purchased additional modules. This metric reflects product value realization and the success of customer success and account management efforts.

Churned MRR tracks revenue lost from customers who canceled their subscriptions entirely. High churn rates indicate product-market fit issues, customer success challenges, or competitive threats.

Contraction MRR measures revenue decreases from customers who downgraded plans or reduced user counts while remaining active. This often signals reduced product engagement or customer budget constraints.

Net New MRR combines all movements: (New MRR + Expansion MRR) - (Churned MRR + Contraction MRR). This is the single most important growth indicator for SaaS businesses.

The MRR waterfall visualization shows how these components flow together, helping GTM teams understand which levers are driving growth and which need attention. According to OpenView's SaaS Benchmarks Report, high-performing SaaS companies achieve net MRR growth rates of 15-20% monthly, with expansion revenue offsetting 30-40% of gross churn.

Key Features

• Predictable Revenue Stream: Provides clear visibility into recurring revenue independent of billing frequency or payment timing

• Normalized Measurement: Converts all subscription contracts (monthly, annual, multi-year) into a standardized monthly value for consistent comparison

• Component-Based Analysis: Breaks down into New, Expansion, Churned, and Contraction MRR for detailed performance insights

• Leading Indicator: Reflects business health before cash flow impacts appear, enabling proactive decision-making

• Excludes One-Time Revenue: Focuses solely on recurring subscription value, filtering out professional services, setup fees, and usage overages

Use Cases

SaaS Growth Tracking and Forecasting

Revenue operations teams use MRR as the primary metric for tracking company growth and building revenue forecasts. By analyzing historical MRR trends and component movements, RevOps can project future revenue with higher accuracy than traditional forecasting methods. This enables better planning for sales capacity, marketing spend, and product investment. Companies typically build 12-month rolling forecasts based on current MRR, expected growth rates, and seasonal patterns.

Sales Performance and Quota Setting

Sales leaders use MRR to set quotas, measure rep performance, and evaluate territory productivity. Instead of measuring quota attainment by number of deals or total contract value, SaaS sales teams focus on New MRR generated. This approach aligns sales incentives with long-term business value rather than optimizing for deal count or one-time revenue. Multi-year contracts are normalized to their monthly value, preventing reps from being rewarded disproportionately for longer contract terms without corresponding value increase.

Customer Success and Expansion Strategy

Customer success teams monitor account health scores and Expansion MRR to identify growth opportunities within the existing customer base. By tracking which accounts are expanding and analyzing the characteristics of high-expansion customers, CS teams can prioritize accounts most likely to grow. Net revenue retention (NRR), calculated as (Beginning MRR + Expansion MRR - Churned MRR - Contraction MRR) / Beginning MRR, becomes the key metric for evaluating customer success effectiveness.

Implementation Example

Here's how a B2B SaaS company tracks and reports MRR using a standard MRR movement table:

Monthly MRR Waterfall (November 2026)
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
<p>Beginning MRR (Nov 1)                    $450,000</p>
<ul>
<li>
<p>New MRR<br>└─ 15 new customers × avg $2,400       $36,000</p>
</li>
<li>
<p>Expansion MRR<br>├─ Upsells (6 accounts)                $12,000<br>├─ Cross-sells (4 accounts)            $8,000<br>└─ Additional users (12 accounts)      $6,000<br>TOTAL EXPANSION                        $26,000</p>
</li>
</ul>
<ul>
<li>
<p>Churned MRR<br>└─ 3 churned customers                 ($7,500)</p>
</li>
<li>
<p>Contraction MRR<br>└─ 2 downgrades                        ($3,000)</p>
</li>
</ul>
<p>━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━<br>Net New MRR                              $51,500<br>Ending MRR (Nov 30)                      $501,500</p>

Key Metrics Dashboard:

HubSpot MRR Tracking Setup:

For companies using HubSpot, create these custom properties on the Deal object:
- deal_mrr (currency): Monthly recurring revenue value
- deal_arr (currency): Annual recurring revenue (deal_mrr × 12)
- mrr_type (dropdown): New, Expansion, Churned, Contraction
- previous_mrr (currency): For tracking expansion/contraction movements

Create a workflow that automatically calculates MRR from deal properties and categorizes revenue type based on associated company status (new vs. existing customer).

Related Terms

• Annual Recurring Revenue (ARR): The annualized version of MRR, calculated as MRR × 12, used for larger contracts and company valuation

• Net Revenue Retention (NRR): Measures revenue retention from existing customers including expansion and churn

• Churn Rate: The percentage of customers or revenue lost each period, directly impacts MRR growth

• Customer Lifetime Value (LTV): Total revenue expected from a customer, heavily influenced by MRR and retention rates

• Expansion Revenue: Additional revenue from existing customers through upsells, cross-sells, or usage growth

• Revenue Operations: The function responsible for tracking and optimizing MRR across the customer lifecycle

• SaaS Metrics: Comprehensive set of performance indicators including MRR, CAC, and LTV

• Account Health Score: Predictive metric used to identify accounts at risk of churn or likely to expand MRR

Frequently Asked Questions

What is Monthly Recurring Revenue (MRR)?

Quick Answer: Monthly Recurring Revenue (MRR) is the predictable monthly revenue a SaaS company receives from all active subscriptions, normalized to a monthly value regardless of billing frequency.

MRR is calculated by summing the monthly value of all active subscription contracts, excluding one-time fees and usage-based charges. For annual contracts, divide the total value by 12. For example, if you have 10 customers each paying $1,200 annually, your MRR is 10 × ($1,200 / 12) = $10,000.

How do you calculate MRR for annual contracts?

Quick Answer: Divide the total annual contract value by 12 to get the monthly recurring revenue contribution from each annual subscription.

For example, if a customer signs a $24,000 annual contract, this contributes $2,000 to your MRR ($24,000 / 12). Even though you may receive payment upfront, MRR reflects the monthly revenue recognition value. This normalization allows you to compare customers on different billing cycles consistently and track revenue growth month over month.

What's the difference between MRR and ARR?

Quick Answer: MRR (Monthly Recurring Revenue) is the monthly subscription revenue, while ARR (Annual Recurring Revenue) is the annualized version calculated as MRR × 12.

Both metrics measure the same recurring revenue but at different time scales. SaaS companies typically use MRR for operational metrics and month-to-month tracking, while ARR is used for annual planning, company valuation, and communicating with investors. According to SaaS Capital research, companies below $10M in revenue often focus on MRR, while larger enterprises report ARR. The choice depends on contract sizes and sales cycle length—companies with longer sales cycles and larger deals typically focus on ARR.

Should usage-based revenue be included in MRR?

Usage-based or consumption revenue should generally not be included in MRR calculations. MRR is designed to measure predictable, recurring subscription revenue. Usage-based charges fluctuate month to month and aren't guaranteed, making them unsuitable for MRR tracking. However, companies can track usage revenue separately as a supplementary metric. Some organizations calculate a hybrid metric by including a baseline usage amount if contracts guarantee minimum consumption levels, but this should be clearly documented in your revenue definitions.

What is a good MRR growth rate for SaaS companies?

Good MRR growth rates vary by company stage and size. Early-stage companies (under $1M ARR) should target 15-20% monthly MRR growth. Growth-stage companies ($1M-$10M ARR) typically achieve 10-15% monthly growth. Mature companies (above $10M ARR) often see 5-10% monthly MRR growth. According to KeyBanc's SaaS Survey, the median public SaaS company grows ARR at 25-30% annually, which translates to roughly 2% monthly MRR growth, though high-performers significantly exceed this rate.

Conclusion

Monthly Recurring Revenue represents the heartbeat of any subscription-based business, providing the clearest view of business health, growth trajectory, and long-term value creation. For B2B SaaS companies, MRR serves as the foundation for nearly every strategic decision, from sales capacity planning to product investment priorities to company valuation.

Go-to-market teams across marketing, sales, and customer success all rely on MRR and its components to measure effectiveness. Marketing teams track how campaigns drive New MRR, sales teams optimize for monthly revenue generation rather than deal count, and customer success teams focus on Expansion MRR and net revenue retention as their primary success metrics. By breaking MRR into its component movements—New, Expansion, Churned, and Contraction—teams gain actionable insights into which growth levers are working and which need attention.

As SaaS businesses continue to evolve and subscription models become more sophisticated with usage-based pricing and product-led growth motions, MRR remains the essential metric for understanding recurring revenue dynamics. Companies that master MRR tracking and optimization, particularly the balance between new customer acquisition and expansion within the existing base, position themselves for sustainable, predictable growth that drives premium valuations and long-term success.

Last Updated: January 18, 2026