MRR growth rate
Definition
If you're a startup founder, growth rate is one of the most important metrics to track. Why? Because it's a leading indicator of your company's health. MRR growth rate is the month-over-month percentage change in your company's recurring revenue. In other words, it's the rate at which your recurring revenue is growing (or shrinking) each month.
MRR growth rate is also a helpful metric for goal setting. If you know your company's MRR growth rate, you can set goals for how much you want to grow your MRR each month. For example, if your company's MRR is $10,000 and you want to grow it by 10% each month, your goal for next month would be $11,000.
How is MRR growth rate calculated?
texMRR growth rate or otherwise known as Net MRR growth rate is calculated by taking the difference between your current MRR and the previous MRR and dividing it by your former MRR. A double digit growth rate indicates a strong, resilient subscription business.t
The formula for calculating MRR growth rate is:
MRR growth rate % = (Net MRR Current Month - Net MRR Last Month) / Net MRR Last Month * 100
You’ll need to have already calculated the net MRR for this month and the last:
Net MRR = New MRR + Reactivation MRR + Expansion MRR - Churn MRR - Downgrades MRR.
Example:
If your company's Net MRR was $10,000 last month and $11,000 this month, your MRR growth rate would be 10% (($11,000-$10,000)/$10,000).
Why is MRR growth rate important to measure?
MRR growth rate is important because it's a leading indicator of your company's health. If your MRR is growing, it's a good sign that your business is on the right track. Conversely, if your MRR is shrinking, it's a red flag that something is wrong.
What's a good MRR growth rate?
There is no magic number when it comes to MRR growth rate. What's important is that you're growing at a healthy rate. A good rule of thumb is to aim for 10-20% month-over-month growth.
How do I improve my MRR growth rate?
There are a few different ways to improve your MRR growth rate. One way is to increase your prices. Another way is to add more features to your product or service. And a third way is to acquire and retain more customers.
