# MRR (Monthly Recurring Revenue)

## Quick Definition
The predictable revenue a subscription business expects to earn each month from active subscriptions.

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Monthly Recurring Revenue (MRR) is the lifeblood metric for any subscription-based business. It represents the normalized monthly value of all active recurring revenue streams, providing a clear snapshot of your business's current revenue generation capacity.

MRR is calculated by normalizing all your subscription revenue to a monthly amount. Annual subscriptions are divided by 12, quarterly by 3, and so on. This gives you a consistent view of your recurring revenue baseline regardless of billing cycles.

Most SaaS and subscription businesses track several variations: New MRR (from new customers), Expansion MRR (from upgrades), Contraction MRR (from downgrades), and Churned MRR (from cancellations). Understanding these components helps you diagnose growth patterns and identify problems early.

## How to Calculate MRR Step by Step

**Step 1: Export your active subscriptions.**  In Stripe, go to Billing → Subscriptions and export all active subscriptions. In Chargebee or Recurly, pull the same report. You need: customer name, plan amount, billing interval, and status.

**Step 2: Normalize to monthly amounts.**  Convert every subscription to its monthly equivalent:

- Monthly plans: use as-is ($100/mo = $100 MRR)
- Annual plans: divide by 12 ($1,200/yr = $100 MRR)
- Quarterly plans: divide by 3 ($300/quarter = $100 MRR)
- Usage-based: use the last month's actual billing amount

**Step 3: Sum it all up.**

- 120 monthly subscribers at various price points: $18,000
- 40 annual subscribers normalized: $8,333
- 15 quarterly subscribers normalized: $2,500
- **Total MRR = $28,833**

**Step 4: Break down MRR movements.**  Compare this month's MRR to last month's, and categorize every change:

- **New MRR:** $3,200 (from 12 new customers)
- **Expansion MRR:** $1,800 (from 8 customers who upgraded)
- **Contraction MRR:** -$600 (from 3 customers who downgraded)
- **Churned MRR:** -$2,100 (from 7 customers who cancelled)
- **Net New MRR:** $3,200 + $1,800 - $600 - $2,100 = **$2,300**

This breakdown is what investors actually want to see — not just the topline number.

**Step 5: Exclude non-recurring revenue.**  Setup fees, consulting hours, one-time add-ons, and pilot/POC payments are not MRR. If a customer paid $5,000 for implementation plus $500/mo subscription, only $500 is MRR.

**Common mistakes founders make:**

- Including one-time charges or non-recurring revenue
- Counting free trial users who haven't converted
- Not normalizing annual contracts (reporting $12,000 in the month it's collected instead of $1,000/mo)
- Forgetting to subtract payment processor fees (MRR should be gross, before Stripe's cut)
- Counting committed but not yet active contracts

**Skip the spreadsheet.**  Unlike traditional accounting software, Futureproof calculates MRR and all its components automatically from your Stripe data — including the movement breakdown investors want to see.

## Formula

MRR = Sum of all monthly subscription values

For annual plans:

MRR = (Annual Contract Value) ÷ 12

Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR

## Example
Your SaaS company has:

- 50 customers on $100/month plans = $5,000 MRR
- 20 customers on $1,200/year plans = $2,000 MRR ($1,200 ÷ 12)
- 10 customers on $300/quarter plans = $1,000 MRR ($300 ÷ 3)

Total MRR = $5,000 + $2,000 + $1,000 = $8,000

## Related Terms

### ARR (Annual Recurring Revenue)
The total value of recurring revenue normalized to a one-year period, calculated by multiplying MRR by 12.

### NRR (Net Revenue Retention)
The percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn.

### Expansion Revenue
Additional revenue generated from existing customers through upsells, cross-sells, and increased usage beyond their original purchase.