Monthly recurring revenue (MRR) is the lifeblood of any SaaS company. It’s the income that is expected to be received on a monthly basis, and it acts as a critical revenue metric that enables subscription model companies to understand their overall business profitability, carry out financial forecasting and planning, and measure growth. MRR is usually normalized into a single figure that can be used as a way to identify trends and track performance over time.
Calculating monthly recurring revenue is simple. All that you need to do is multiply your average revenue per account by the total number of customers for that month:
MRR = number of customers * average billed amount
For example, if 30 customers paid you an average of $74.99 per month, your MRR would be $2,249.70.
As you grow, you’ll want to track not only your MRR but also any changes over previous months. This can be done by using three figures:
- New MRR: Any additional MRR from new customers in a given month.
- Expansion MRR: Any additional MRR from customer upgrades.
- Churned MRR: MRR lost from cancellations and downgrades.
Plug all three of these into the following formula to calculate MRR change:
MRR change = New MRR + Expansion MRR = Churned MRR