What Is MRR (Monthly Recurring Revenue)?
Also known as MRR, Monthly recurring revenue
Monthly recurring revenue (MRR) is the predictable subscription revenue a business expects to earn every month from its active customers. It is calculated by adding up the normalized monthly value of every active subscription. Annual plans are divided by 12, and one-time fees are excluded. MRR is the core operating metric for subscription companies.
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Open the toolMonthly Recurring Revenue (MRR) explained
MRR gives a clean monthly read on the size of a subscription business. Because it normalizes billing, a customer paying $6,000 once a year and a customer paying $500 every month both add $500 to MRR. That makes month over month comparisons honest even when billing schedules, discounts and contract terms are messy.
The most useful view is MRR movement. New MRR comes from new customers, expansion MRR from upgrades and added seats, contraction MRR from downgrades, and churned MRR from cancellations. Net new MRR is new plus expansion minus contraction and churn. Watching these four lines tells you whether growth is coming from acquisition, existing accounts or both.
For teams running outbound or content programs, MRR is where pipeline work becomes visible. Tracking new MRR by source, such as cold email, LinkedIn, SEO or referrals, shows which channels produce revenue rather than just meetings. MRR multiplied by 12 gives ARR, and MRR per account feeds LTV and payback calculations.
Monthly Recurring Revenue (MRR) formula
MRR = Number of paying customers × Average monthly revenue per customer
- Number of paying customers
- Active accounts on a paid recurring plan at the measurement date, excluding free users and trials.
- Average monthly revenue per customer
- Mean normalized monthly subscription value per paying customer, with annual plans divided by 12 and one-time fees excluded.
Worked example: A company has 250 paying customers with an average subscription value of $320 a month. MRR = 250 × $320 = $80,000. A customer on a $6,000 annual plan counts as $6,000 ÷ 12 = $500 of that MRR.
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Monthly Recurring Revenue (MRR) example
A LinkedIn automation tool starts March with $50,000 MRR. It adds $6,000 in new MRR from 30 new customers and $2,000 from upgrades. It loses $1,000 to downgrades and $3,000 to cancellations. Net new MRR is $6,000 + $2,000 minus $1,000 and $3,000, which is $4,000. March ends at $54,000 MRR, 8% growth for the month.
How to calculate MRR
Export active subscriptions
Pull every active paid subscription from your billing tool on the last day of the month. Leave out trials and free plans.
Normalize billing periods
Convert each plan to a monthly amount: divide annual plans by 12 and quarterly plans by 3. Apply discounts the customer actually pays.
Exclude one-time charges
Remove setup fees, onboarding packages and one-off services. They are real revenue but they do not recur.
Sum and split movement
Add the monthly values for total MRR, then split the change from last month into new, expansion, contraction and churned MRR.
Common mistakes
- Counting the full value of an annual payment in the month it is billed, which creates fake spikes and drops.
- Including free trials or unpaid accounts that have not been charged yet.
- Ignoring discounts and recording list price instead of what customers actually pay each month.
- Reporting only total MRR and missing churn and contraction hidden underneath strong new sales.
Monthly Recurring Revenue (MRR) FAQ
It depends heavily on company size and stage. Early-stage companies on a small base can grow MRR by double digits per month, while larger companies grow much more slowly in percentage terms. Compare yourself with companies at a similar ARR, and watch net new MRR as well as the percentage.
Net new MRR is the total change in MRR over a period. It equals new MRR plus expansion MRR, minus contraction MRR and churned MRR. It shows how much the recurring revenue base actually grew after accounting for losses.
Yes. An annual contract counts as one twelfth of its value each month. A $12,000 annual deal adds $1,000 to MRR. This keeps MRR steady and comparable, regardless of when invoices are sent.
MRR measures recurring revenue on a monthly basis and ARR measures it on an annual basis. ARR is usually MRR multiplied by 12. Companies with monthly plans and smaller customers tend to focus on MRR, while enterprise companies tend to report ARR.