[GTM glossary](/glossary.txt) Monthly recurring revenue

GTM Strategy & SaaS Metrics

# Monthly recurring revenue (MRR)

Also known as: MRR

In short

Monthly recurring revenue (MRR) is the predictable revenue a company earns from active subscriptions in a month. Annual and quarterly plans are converted to a monthly amount so every customer is comparable.

MRR is the monthly view of the same idea behind annual recurring revenue (ARR). Teams use MRR when plans are small or billed often, and ARR when contracts are larger and annual.

## How to calculate MRR

* **Basic formula:** Add the monthly recurring fee of every active subscription.
* **Annual plans:** Divide the annual price by 12. A 1,200 annual plan contributes 100 to MRR.
* **Exclude one-time fees:** Setup fees, services, and non-recurring charges are not MRR.
* **Example:** Say 50 customers pay 100 a month and 10 customers pay 2,400 a year. MRR is 5,000 plus 2,000, or 7,000.

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## The components of MRR movement

Tracking the change in MRR is more useful than tracking the total alone.

* **New MRR:** From customers who started this month.
* **Expansion MRR:** From upgrades, extra seats, or add-ons.
* **Contraction MRR:** From downgrades.
* **Churned MRR:** From cancellations.
* **Net new MRR:** New plus expansion, minus contraction and churn.

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## How GTM teams use MRR

* **Forecasting:** Predictable monthly revenue makes planning hiring and spend easier.
* **Growth tracking:** Month-over-month growth shows momentum sooner than annual figures.
* **Diagnosis:** Splitting MRR by segment or channel shows where growth and churn come from.

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## Common mistakes

* **Counting usage spikes:** Variable or one-off usage charges are not recurring.
* **Counting unsigned deals:** Only include active, paying subscriptions.
* **Ignoring discounts:** Use the amount actually billed after discounts.
* **Confusing MRR with cash:** MRR is not cash collected. Billing timing and failed payments make them differ.

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## Monthly recurring revenue FAQs

**What is monthly recurring revenue (MRR)?**

Monthly recurring revenue is the predictable revenue a company expects from active subscriptions each month. Plans billed annually or quarterly are normalized to a monthly amount, and one-time fees are excluded.

**How do you calculate MRR?**

Add up the monthly fee of every active subscription. For annual plans, divide the yearly price by 12. Leave out setup fees, one-time services, and irregular usage charges so the figure stays truly recurring.

**What is the difference between MRR and ARR?**

MRR is recurring revenue per month, and ARR is recurring revenue per year. ARR is roughly MRR times 12. Teams with small, frequent subscriptions tend to use MRR, while those with larger annual contracts favor ARR.

**What is net new MRR?**

Net new MRR is the change in monthly recurring revenue over a period. It equals new MRR plus expansion MRR, minus contraction and churned MRR. It shows whether your recurring revenue base is growing or shrinking.

Share term

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## More related phrases

* [Committed monthly recurring revenue (CMRR)](/glossary/committed-monthly-recurring-revenue.txt)
* [Annual contract value](/glossary/annual-contract-value.txt)
* [Annual run rate](/glossary/annual-run-rate.txt)

## Similar phrases

* [Annual recurring revenue (ARR)](/glossary/annual-recurring-revenue.txt)  
Annual recurring revenue (ARR) is the yearly value of the subscription revenue a company expects to keep earning from its current customers.
* [Net new ARR](/glossary/net-new-arr.txt)  
Net new ARR is the change in annual recurring revenue over a period: new customer and expansion ARR, minus churned and contracted ARR.
* [Average revenue per user (ARPU)](/glossary/average-revenue-per-user.txt)  
Average revenue per user (ARPU) is the revenue earned per user or account in a period, showing how much each customer is worth on average.
* [Revenue churn](/glossary/revenue-churn.txt)  
Revenue churn is the share of recurring revenue lost in a period to cancellations and downgrades, shown as a percentage of revenue at the start of the period.
* [Expansion revenue](/glossary/expansion-revenue.txt)  
Expansion revenue is the additional revenue a company earns from existing customers through upsells, cross-sells, added seats, or higher usage.