MRR (Monthly Recurring Revenue)

MRR is calculated by multiplying the number of active paying customers by the average revenue per user per month, or by summing the monthly subscription value of every active contract. It is broken down into several components that together tell the full story of revenue momentum. New MRR is the revenue added from newly acquired customers. Expansion MRR captures additional revenue from existing customers who upgrade or purchase add-ons. Churned MRR represents revenue lost from customers who cancel or downgrade. Net new MRR combines all three to show the overall change in the recurring revenue base from one month to the next.

MRR is foundational to understanding the health and trajectory of a subscription business because it removes the noise of timing and one-off transactions that can distort monthly revenue figures. A business growing its MRR consistently while keeping churned MRR low is demonstrating strong product-market fit and customer retention, which are two of the most important indicators of long-term business viability. MRR also feeds directly into ARR projections, runway calculations, and valuation models, making it one of the first numbers investors ask about when evaluating a SaaS or subscription business. Tracking MRR by cohort over time further reveals how different customer groups behave and whether the business is improving or declining in its ability to retain and expand revenue from its customer base.