What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is the predictable total revenue that your business expects to earn every month from all active subscriptions. MRR normalizes varying subscription terms and pricing plans into a single, consistent monthly figure. It is the foundational SaaS metric — used to calculate growth rates, forecast revenue, and evaluate the health of a subscription business.
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Monthly Recurring Revenue (MRR):
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The Formula
MRR = Number of Active Subscribers × Average Revenue per User (Monthly)
Worked Examples
Single-Tier Pricing
A B2B SaaS tool has 150 active subscribers each paying $49/month.
- Active subscribers: 150
- ARPU: $49/mo
- MRR = 150 × $49
Multi-Tier Pricing
A company has 100 Basic subscribers at $29/mo, 60 Pro at $79/mo, and 20 Enterprise at $249/mo.
- Basic MRR: 100 × $29 = $2,900
- Pro MRR: 60 × $79 = $4,740
- Enterprise MRR: 20 × $249 = $4,980
- Total MRR = $2,900 + $4,740 + $4,980
What Is a Good Monthly Recurring Revenue (MRR)? Industry Benchmarks
| Stage / Context | Typical Value | What It Means |
|---|---|---|
| Pre-Product Market Fit | $0 – $10K | Manually closing early design partners. |
| Early Growth | $10K – $83K | ($100K–$1M ARR). Repeatable inbound or outbound motion forming. |
| Growth Stage | $83K – $830K | ($1M–$10M ARR). Scaling with a defined GTM and sales team. |
| Scale | $830K+ | ($10M+ ARR). Multi-product, multi-segment expansion. |
How to Improve Monthly Recurring Revenue (MRR)
Reduce Monthly Churn
A 2% monthly churn rate means losing ~22% of your MRR every year. Improving onboarding, customer success touchpoints, and product stickiness directly protects MRR.
Grow Expansion MRR
Expansion MRR from upsells and seat growth compounds on top of your existing base. Companies with strong expansion MRR can grow even if new customer acquisition slows.
Optimize Pricing Tiers
Ensure your mid and high-tier plans have enough differentiated value to pull customers upmarket. Many SaaS products leave money on the table by not monetizing heavy users effectively.
Accelerate New Customer Acquisition
Focus on the acquisition channels with the lowest CAC and highest LTV:CAC ratio. Doubling conversion rates on existing traffic has an outsized impact on new MRR additions.
Monthly Recurring Revenue (MRR) vs. Related Metrics
Monthly Recurring Revenue (MRR) vs. ARR (Annual Recurring Revenue)
MRR × 12 = ARR. MRR is better for tracking short-term momentum (month over month). ARR is used for annual planning, investor updates, and benchmarking against industry data.
Monthly Recurring Revenue (MRR) vs. Bookings
Bookings represent the total contract value signed in a period — including multi-year deals. MRR only reflects the monthly revenue from active subscriptions. A $36,000 two-year contract adds $1,500 to MRR, but $36,000 to bookings.
Common Mistakes When Calculating Monthly Recurring Revenue (MRR)
Including Annual Contracts as Full MRR
A $1,200 annual contract contributes $100/month to MRR, not $1,200. Always normalize annual and multi-year contracts to their monthly equivalent.
Counting Free Trial Users
MRR only includes paying subscribers. Free trial users, freemium users, and churned customers should never be counted, even if they were charged in a previous period.
Ignoring Contraction MRR
When customers downgrade, your MRR shrinks. Track Contraction MRR separately so you understand the full picture of your net MRR movement each month.
Frequently Asked Questions
About the reviewer
Rajat Gupta is the founder of Spotsaas. Over the past two years, he has reviewed 2,000+ tools across CRM, HR, AI, and finance — applying hands-on product research and a background in commerce and the CFA program to evaluate software through a business and ROI lens. His goal: help teams make software decisions they won't regret.
Disclaimer: This research has been collated from a variety of authoritative sources. We welcome your feedback at [email protected].