Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue, or MRR, is the sum of predictable, monthly recurring revenue, usually from subscriptions. The metric shows how much reliable revenue comes in month after month. It is an important indicator, especially for subscription-based business models. It is calculated as the sum of all active subscriptions' contract values normalised to one month at the reporting date. Annual contracts are divided by twelve regardless of when payment actually occurs.

One-off revenue from setup, training or consulting does not belong in it, and neither does purely usage-based revenue without a contractual basis. Its practical value emerges through the movement analysis, which rolls the prior month's balance forward for new customers, expansion within the existing base, downgrades, cancellations and win-backs. Net new growth, churn and net revenue retention can be read directly from it. Because the view is monthly, breaks in trend are visible far earlier than in annual figures, which is decisive for managing sales and pricing. The link to annual recurring revenue is simple: it equals twelve times MRR at the relevant date.

The boundary with accounting again deserves attention, since reported revenue follows the period in which the service is delivered and therefore differs from the annualised figure. It should be noted that the metric is easy to influence where the definition is not clearly settled: including usage-based revenue, the treatment of trial periods and the handling of contracts under notice but still running all change the figure considerably. A documented written definition and a reconciliation to reported revenue are therefore regularly required. Cohort analysis is equally informative, since it shows whether later cohorts retain worse than earlier ones.