Monthly Recurring Revenue or MRR is a business metric widely used by SaaS businesses or businesses which operate on a subscription basis. MRR is the Monthly revenue that the business can expect to generate from the renewal of their services done by its existing clientele. Monthly Recurring Revenue, as the name suggests, is the total recurring revenue that the business can generate from their existing clients in a month, every month.
MRR is an important business metric to consider for a business that is planning to scale up. It gives them an idea about their short term sustainability as well as the retention of their user base on a monthly basis. Basically, if a business ever fails to generate enough revenue in any particular month from new customers then the MRR will save the business from going down under. Every business has a different formula for calculating Monthly Recurring Revenue but we have tried to make it simple for your easy understanding.
MRR = Total revenue from renewals in a month + Revenue from any plan upgrades + Revenue from any upselling – Revenue lost due to subscription cancellations (churn)
Putting the above formula into words, Monthly Recurring Revenue is simply the money left with the company every month after adding the revenue from renewals, upgrades and upselling and subtracting the revenue lost due to cancellations of subscriptions, also called churns.
