What is Monthly Recurring Revenue (MRR)?
MRR is the normalized monthly value of every active subscription you have right now. It is a run rate, not a cash figure: it answers what a month of your current book is worth, not what landed in the bank.
Normalized is the load-bearing word. An annual plan billed at $1,200 contributes $100 of MRR every month of its term, not $1,200 in January and nothing after. A quarterly plan at $300 contributes $100. Without that normalization, MRR spikes and craters on billing dates and stops describing the business.
MRR counts recurring subscription revenue and nothing else. One-off setup fees, professional services, hardware and usage overages that vary month to month are excluded, because none of them recur on their own. The point of the number is predictability, so anything you cannot count on next month does not belong in it.
How to calculate MRR
MRR = sum of every active subscription, normalized to a monthly amount
- active subscription
- a subscription currently providing service, including ones in dunning
- normalized
- plan price ÷ the number of months the plan covers
From last month, the movement way
MRR = starting MRR + new business + expansion + reactivation − contraction − churn
MRR example
Given
- 180 customers on a $99 monthly plan
- 120 customers on a $2,400 annual plan
- 20 customers on a $149 monthly plan, all in a free trial
The annual cohort is 40% of the customer count but 57% of MRR. Averaging invoice totals instead of normalizing would have hidden that.
Why MRR matters
- It is the base every other subscription metric divides by. Churn rates, growth rates, ARPA and LTV all reference MRR at the start or end of a period, so an MRR definition that drifts quietly corrupts the whole set.
- It is the number investors benchmark you against, which means the definition needs to be the standard one rather than a flattering local variant.
- Because it strips billing timing out, MRR tells you whether the business grew this month even when cash flow says otherwise.
Common MRR mistakes
Counting the annual invoice in the month it was billed
A $12,000 annual contract is $1,000 of MRR for twelve months, not a $12,000 spike in March. This is the single most common way a homegrown spreadsheet stops matching an investor update.
Folding in one-off revenue
Setup fees, migrations and consulting are real revenue that belong in your P&L, not in a run rate. If it will not repeat next month without another sale, it is not MRR.
Dropping customers in dunning
A failed payment is not a cancellation. Removing a past-due customer from MRR on the day the card bounces overstates churn and then overstates reactivation when the retry succeeds two days later.
Counting discounts at list price
MRR is what the customer actually pays. A 20% discount on a $500 plan is $400 of MRR for as long as the discount runs.
How Kometrics computes MRR
Kometrics never stores an MRR number directly. It builds a ledger of MRR movements from your billing data (every new subscription, upgrade, downgrade, cancellation and reactivation, each with the MRR the customer carried after it), and MRR at any date is the ledger carried forward to that date. That is why the MRR chart and the movement breakdown can never disagree: they are two views of one ledger.
The MRR report shows end-of-period MRR at whatever granularity you pick, with every movement behind it one click away. Customers in dunning stay in MRR on purpose, and their exposure is reported separately as past-due MRR.
Related terms
ARR is the annualized value of your recurring revenue, almost always computed as MRR times 12. It describes what the next twelve months are worth if the book stopped changing today.
Net MRR movementNet MRR movement is the total change in MRR over a period once every movement is added up: new business, expansion and reactivation on one side, contraction and churn on the other. It is the bridge between where MRR started and where it ended.
Expansion MRRExpansion MRR is the additional recurring revenue you earn from customers you already have. Upgrades to a higher plan, extra seats, add-on modules and price increases all count; a new customer never does.
ARPAARPA is your recurring revenue divided by the number of paying accounts: what the average customer is worth per month. It is also called ARPU or ARPC, with account, user and customer used loosely to mean the same thing in most SaaS reporting.
DunningDunning is the process of recovering a failed subscription payment: the retry schedule, the emails asking the customer to update their card, and the eventual decision to cancel if nothing works. Revenue in dunning has not been lost yet, but it is the part of the book most at risk.
Get this number from your billing data
Kometrics connects to Stripe, Paddle, Creem and Asaas and computes MRR continuously, with every movement behind it. Free under $1,000 MRR.
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