Monthly Recurring Revenue (MRR)
Normalised monthly subscription revenue — and, broken into its movements, the clearest monthly read on whether a business is growing.
MRR normalises all subscriptions to a monthly figure: an annual plan at €1,200 contributes €100 of MRR regardless of when it was paid. Annual contracts paid up front are cash in the month received and MRR spread across twelve, and conflating the two is how a company celebrates a strong cash month it will not repeat.
The single number is much less useful than the movement breakdown: new MRR from new customers, expansion from upgrades, contraction from downgrades, churned MRR from cancellations, and reactivation from returning customers. Net new MRR is the sum. Two companies can post identical growth while one is compounding on its existing base and the other is replacing a leaking bucket — and only the breakdown shows which.
In practice
A product reported 6% month-on-month MRR growth for two quarters. Broken down: new MRR was 14% of base, churned was 9%, expansion was near zero. Growth depended entirely on acquisition spend, and the moment it paused, MRR fell. The headline number had never once indicated the problem.
Where teams get it wrong
- Reporting MRR without the movement breakdown.
- Counting annual prepayments as MRR in the month received.
- Including usage overages, which are not contracted recurring revenue.
- Counting trials or unpaid accounts.
- Reporting net new MRR only, which hides both churn and expansion.
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Related terms
All terms- Annual Recurring Revenue (ARR)The value of contracted subscription revenue normalised to a year — recurring only, excluding one-off fees.
- Net Revenue Retention (NRR)Revenue from existing customers this period against the same cohort a year ago, including expansion, contraction and churn — but no new customers.
- ChurnThe rate at which customers stop paying or stop using a product over a given period — the mirror image of retention.
- ARPUAverage revenue per user or account over a period — the numerator in most unit-economics calculations, and the one most often averaged badly.