What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is the predictable, recurring revenue a SaaS business earns each month from its subscription customers. MRR is the building block of ARR (Annual Recurring Revenue = MRR × 12).
MRR can be broken into components: New MRR (from new customers), Expansion MRR (upgrades and add-ons from existing customers), Churned MRR (lost from cancellations), and Contraction MRR (downgrades). Net New MRR = New + Expansion - Churned - Contraction.
Tracking MRR components gives you a much richer picture than total MRR alone. If your total MRR is growing but churned MRR is also growing, you have a leaky bucket that will eventually cap your growth.
Why It Matters
MRR and its components are the pulse of a SaaS business. MRR growth rate, churn rate within MRR, and expansion MRR ratio are leading indicators of company health and valuation trajectory.
Frequently Asked Questions
What is MRR?
Monthly Recurring Revenue is the total predictable subscription revenue earned each month. MRR × 12 = ARR.
What are the components of MRR?
MRR breaks into New MRR (new customers), Expansion MRR (upgrades), Churned MRR (cancellations), and Contraction MRR (downgrades). Net New MRR = New + Expansion - Churned - Contraction.
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Richard Ewing is a Product Economist and AI Capital Auditor. He helps companies translate technical complexity into financial clarity.
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