Monthly recurring revenue (MRR)
If you're in the business of selling anything on a subscription basis, then you're likely very interested in your Monthly recurring revenue, or MRR. This metric is a key indicator of the health of your business, as it represents the amount of revenue that you can count on every month.
Monthly Recurring Revenue (MRR) is an important metric for many businesses and can be used to measure the financial health of a company. It is also one of the most misunderstood metrics, and often miscalculated in home-brew analytics solutions.
You should be monitoring multiple parts of MRR for your business, including New MRR, Expansion MRR, Reactivation MRR, Contraction MRR and MRR Churn.
How is Monthly recurring revenue (MRR) calculated?
MRR is calculated by taking the total amount of recurring revenue for a given month, and normalising it to a monthly value. For example where a subscription is annual, you would divide it’s annual value by 12 to find the monthly value to the business.
The formula for calculating Monthly recurring revenue (MRR) is:
MRR = Sum of all recurring charges, normalised to 1 month.
Upzelo does not deduct transaction fees, refunds or deduct cancellations / subscription pauses immediately from the calculated MRR.
Why is Monthly recurring revenue (MRR) important to measure?
MRR measures how much money your business brings in every month, which allows you to make decisions about hiring or expanding based on current trends in financial performance rather than just sales volume for each individual transaction. It also provides insight into long-term growth potential and helps you predict future revenue needs based on increasing customer retention rates or higher rates of customer acquisition.
Frequently asked questions
Have another question? Reach out to our retention expert team.
- What is MRR?
- MRR refers to the amount of money your company makes on a monthly basis from subscriptions or recurring revenue. This includes all recurring revenue that your company has collected in the previous month.
- What is a good MRR?
- A good MRR will vary from business to business varying based on their price point and the number of subscriptions to their service/ product they have. A good MRR generally is one that is greater than all your costs and expenses indicating that your business is growing.
- What revenue is not included in MRR?
- MRR does not include one-off revenue or charges on an invoice that have been fully discounted.
- How can I increase MRR for my business?
- There are a few things that you can do to increase your monthly recurring revenue. First, you can focus on acquiring new customers. This can be done through marketing and sales efforts. Once you have acquired a customer, you can then work on retaining them. This can be done by providing great customer service and delivering on your promises.
- Another way to increase your monthly recurring revenue is to upsell your existing customers. This could be done by offering them additional services or products that they can purchase.
- The most effective, and often the quickest way to give your MRR a boost is to save more customers from leaving or cancelling their subscription.i
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