What is Monthly Recurring Revenue
MRR (Monthly Recurring Revenue) is the predictable revenue a business expects to earn every month from its active subscriptions. It provides a clear financial indicator of growth by aggregating all recurring revenue streams into one standardized monthly figure. Learn more about MRR.
Why MRR Matters in 2026
In 2026, MRR remains a critical metric for subscription-based and SaaS companies, offering a reliable way to track business health and forecast revenue trends. It enables stakeholders—from founders to investors—to measure growth momentum and make data-driven decisions. MRR also helps identify churn rates, expansion revenue, and the overall impact of pricing strategies, making it foundational for sustainable, scalable revenue models.
By focusing on MRR, companies can optimize their customer acquisition and retention efforts, anticipate cash flow, and prioritize resources toward the most profitable segments. This metric is indispensable in a competitive market landscape where predictable income streams are paramount for business valuation and long-term planning.
How to Calculate and Use MRR: Key Steps
Calculating MRR involves summing the monthly subscription revenues from all active customers. The basic formula is: Number of Customers × Average Revenue Per User (ARPU). To refine MRR, include factors such as:
- New MRR: Revenue from newly acquired customers within the month.
- Expansion MRR: Additional revenue from upselling or cross-selling to existing customers.
- Churned MRR: Lost revenue due to cancellations or downgrades.
- Net MRR: Total MRR after accounting for growth and churn.
To leverage MRR effectively, integrate it into financial dashboards, set monthly growth targets (e.g., 10% increase), and analyze trends by customer segments or product lines. This approach enables proactive management of subscription revenue and highlights areas needing improvement.
3 Real-World Examples of MRR in B2B
Example 1: SaaS Startup Growing Monthly Revenue
A B2B CRM platform leverages MRR to monitor the impact of its new pricing tier. By tracking MRR growth from $50K to $75K over 3 months, the company validates pricing changes and plans future feature development accordingly.
Example 2: Churn Reduction in a Consulting Subscription
A consulting firm offering monthly advisory subscriptions uses MRR to spot a dip caused by customer churn. They launch retention campaigns targeting at-risk clients and successfully stabilize MRR within the quarter.
Example 3: Upselling Campaign in Marketing Software
A marketing automation tool increases MRR by promoting add-on features to existing customers. Expansion MRR accounts for 15% of total MRR growth, showcasing the revenue potential of account expansion strategies.
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How do you calculate Monthly Recurring Revenue (MRR) for a B2B SaaS business?
To calculate Monthly Recurring Revenue (MRR) for a B2B SaaS business, multiply the number of paying customers by their average monthly subscription value. For example, if you have 100 customers paying an average of $250 per month, your MRR would be $25,000. For annual contracts, simply divide the total contract value by 12 to convert it to a monthly figure. Remember to exclude one-time payments, setup fees, or non-recurring add-ons from your calculations to maintain an accurate view of your predictable revenue stream. Track this metric consistently month-over-month to identify growth patterns and make data-driven business decisions.
What strategies can improve MRR growth and reduce churn for subscription businesses?
To improve MRR growth, focus on upselling existing customers with premium features, implementing strategic price increases, and creating longer-term contracts with incentives. Reduce churn by establishing a proactive customer success program that identifies at-risk accounts before they cancel and regularly collects feedback to address pain points. Optimize your onboarding process to ensure customers quickly achieve value, implement a win-back campaign for recently churned customers, and consider offering annual billing options with discounts to lock in revenue for longer periods.
What's the difference between ARR and MRR in subscription revenue models?
ARR (Annual Recurring Revenue) represents the annualized value of subscription revenue, essentially MRR multiplied by 12, providing a longer-term view of business performance. While MRR focuses on month-to-month revenue fluctuations and immediate cash flow, ARR helps with annual planning, investor discussions, and understanding the overall business trajectory. ARR is particularly useful for B2B companies with annual contracts, while MRR offers more granular insights for businesses with monthly billing cycles or high churn rates. Both metrics work together to give growth teams a complete picture: MRR for tactical adjustments and ARR for strategic planning and valuation discussions.
