Revenue metric
MRR (Monthly Recurring Revenue)
Monthly Recurring Revenue (MRR) sums the monthly value of every active subscription, normalizing annual or quarterly subscriptions down to their monthly equivalent. It excludes one-time charges (setup fees, courses, single purchases) and represents the predictable revenue base the business can plan against.
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Formula
MRR = sum of (active subscription monthly value)
Where:
- active subscription monthly value = Monthly billing amount for monthly plans; annual billing amount divided by 12 for annual plans; quarterly divided by 3 for quarterly plans. Excludes one-time charges.
Worked example
Suppose you have 100 customers: 80 on $29/month plans, 15 on $99/month plans, and 5 on $999/year plans. MRR = (80 × $29) + (15 × $99) + (5 × $999 / 12) = $2,320 + $1,485 + $416.25 = $4,221.25.
What it tells you
- The predictable revenue base for next month, assuming zero churn.
- The 'speed' of the business — MRR growth rate is the indie SaaS speedometer.
- Whether the recurring engine is real or whether revenue is one-time-heavy.
What it does NOT tell you
- Profitability — MRR ignores cost of goods, support, and acquisition cost.
- Quality of revenue — $1,000 from 1 customer is more concentrated risk than $1,000 from 100.
- Future MRR — it is a snapshot, not a forecast. Churn risk is invisible in this number alone.
Common miscalculations
- Including one-time charges (course purchases, setup fees). These belong in total revenue, not MRR.
- Dividing annual plans by 12 when they have not been collected yet. Pre-paid annual revenue is real MRR; uncollected commitment is not.
- Counting churned subscriptions for the full month they churned in. Standard practice is to count them up to the churn date or for the full period billed, but not beyond.
- Mixing currencies without converting. Multi-currency MRR must be normalized to one reporting currency at a fixed monthly rate.
What is a good MRR?
See the directional range on the SaaS MRR growth rate benchmark page →
Frequently asked
- Should I report MRR or total revenue?
- Both, separately. MRR shows the recurring engine; total revenue shows the full business including one-time and project revenue. Investors and operators care about both, but for different decisions.
- How do I handle prorated upgrades or downgrades?
- Count the new monthly rate from the date of change. The prorated portion lives in the cash-basis revenue numbers, not in MRR. MRR is a normalized speedometer, not a cash-flow report.
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