Monthly recurring revenue (MRR)

Monthly recurring revenue is the revenue a company expects to receive every month. Annual recurring revenue is simply multiplying the MRR by 12. MRR and ARR are represented in € amounts. They are one of the most critical metrics for companies that make revenue on a subscription basis because it helps the company plan and forecast correctly. Also, this is one of the prime metrics investors look at before investing in a company. Recurring revenue is one of the major benefits of SaaS business models compared to other business models, which need to constantly make sales and have to start from zero every month.

How to calculate MRR

Calculating the MRR is straightforward, but identifying the different factors that constitute MRR can be more difficult. Calculate the MRR by multiplying the monthly average revenue per user by the total number of monthly users.

For example, if the monthly average revenue per user is €10 and you have 20 monthly users, your MRR is €200.

MRR = €10 x 20 = €200

To get the annual recurring revenue, simply multiply your MRR by 12.

ARR = €200 x 12 = €2400

This calculation, however, only touches the surface of MRR. As your business grows, your MRR is going to change. In every SaaS business, customers churn or expand their existing pricing plans. That’s why it is important to keep the different types of MRR in mind.

Types of MRR:

• New MRR
• Expansion MRR
• Churned MRR

For better insights, you need to monitor these metrics over time and identify trends. Even though there are benchmarks for a healthy MRR, these standards are only good to get the first indication of growth. It is more important to measure your own numbers and compare them to your companies’ results.

How to improve MRR & ARR

• Raise your prices
• Reward people to upgrade
• Make upgrading to higher plans easy
• Provide value regularly
• Improve and expand your service

Does that look Greek to you? Do you need help with your Product, Strategy or Business? I can help, lets talk!