Monthly Recurring Revenue (MRR)
The predictable total of all recurring subscription revenue normalized into a monthly amount.
FORMULA
MRR = Total active subscriptions × Monthly recurring price per subscriptionWhy it matters
MRR is the heartbeat of a SaaS business. While ARR is used for valuation and board reporting, MRR is the operational cadence that product and go-to-market teams manage against. Tracking MRR allows teams to understand short-term momentum, isolate the impact of recent pricing changes, and manage cash flow runway effectively. Breaking down MRR into its components—New MRR, Expansion MRR, Contraction MRR, and Churned MRR—provides a granular view of business health. A sudden spike in Contraction MRR, for instance, provides early warning of product-market fit degradation before it fully impacts the annual ARR target.
2025 BENCHMARK
Bessemer's 2025 State of the Cloud notes that top-quartile early-stage SaaS companies add 15% to 20% Net New MRR month-over-month.
COMMON MISTAKES
- Including non-recurring add-ons or usage overages that lack a predictable baseline.
- Dividing annual contracts by 12 without accounting for early termination rights.
- Confusing MRR with cash receipts; cash flow and MRR recognition often diverge.