For businesses that run on subscriptions, looking only at the total sales made in a month is not enough to understand the company’s financial situation. One-off sales and revenue that repeats regularly every month tell very different stories. MRR is the metric that separates them.
What Is MRR?
MRR is the monthly recurring revenue a business earns, or expects to earn, from subscriptions and regular payments within a month. It is revenue that repeats every month without the business having to sell again.
Which Businesses Is MRR Important For?
MRR matters for businesses that charge customers at regular intervals: SaaS companies, hosting and server companies, digital agencies, education platforms, membership systems and subscription services.
How Is MRR Calculated?
For MRR, all regular revenue must be converted to a monthly amount.
- Simple MRR formula: MRR = number of customers × average monthly revenue per customer.
- With different packages: Add up each package’s price multiplied by its number of customers.
- Annual subscriptions: Divide the annual fee by 12 (for example 12,000 TL a year counts as 1,000 TL a month).
- Quarterly subscriptions: Divide by 3.
What is included in MRR? Only revenue that repeats regularly is included: monthly and annual subscription fees converted to months, recurring add-on fees and recurring maintenance or hosting fees. Not included: one-off setup fees, one-time projects, taxes, refunds and non-recurring payments.
What Are the Types of MRR?
MRR should not be tracked as a single total only; to understand what makes up the revenue, look at its movements:
- New MRR: Monthly recurring revenue from new customers won in a given month.
- Expansion MRR: Extra revenue from existing customers moving to higher packages, buying extra users or adding services.
- Contraction MRR: Revenue lost when existing customers move to a lower package or cancel some add-ons.
- Churn MRR: Revenue lost from customers who cancel their subscription entirely.
- Reactivation MRR: Revenue from customers who canceled earlier and subscribe again.
- Net New MRR: New + expansion + reactivation − contraction − churn.
| MRR type | Amount | Effect on revenue |
|---|---|---|
| New MRR | 30,000 TL | Increase |
| Expansion MRR | 8,000 TL | Increase |
| Contraction MRR | 3,000 TL | Decrease |
| Churn MRR | 7,000 TL | Decrease |
| Net New MRR | 28,000 TL | Increase |
MRR and Related Concepts
- MRR vs. ARR: ARR is Annual Recurring Revenue, roughly MRR × 12.
- MRR vs. total revenue: Total revenue covers all income in the period; MRR covers only regular, repeating revenue.
- MRR vs. turnover: Turnover is the monetary value of all sales; MRR is the recurring part.
- MRR vs. cash flow: MRR is not exactly the same as cash movement; for example, a customer who pays a year up front increases cash at once but adds only one-twelfth to MRR each month.
- MRR vs. bookings: Bookings are the total value of signed contracts, including amounts not yet collected or delivered.
- MRR and ARPU: ARPU = total MRR ÷ number of active customers.
Growth, Churn and Retention
- MRR growth rate: The percentage change in MRR compared with the previous month: (current MRR − previous MRR) ÷ previous MRR × 100.
- MRR churn rate: Lost recurring revenue as a share of the MRR at the start of the period.
- Net Revenue Retention (NRR): Shows how much revenue the existing customer base keeps after upgrades and losses; above 100% means growth from existing customers alone.
Why Is MRR Important?
- It provides predictable revenue.
- It measures growth.
- It makes customer loss visible.
- It makes budget planning easier.
- It supports company valuation.
- It shows sales and marketing efficiency.
How Do You Increase MRR?
- Increase the number of new customers (SEO, Google Ads, social media and referrals).
- Improve the package structure (starter, professional, corporate, custom).
- Upsell existing customers to higher packages.
- Offer add-on services that bring regular revenue.
- Reduce churn: Keeping existing customers is often more sustainable than winning new ones.
- Update pricing: Prices that stay unchanged for a long time lower the real value of MRR as costs rise.
- Encourage annual plans: They can improve cash flow and loyalty.
- Run win-back campaigns for canceled customers.
Mistakes in MRR Tracking
- Adding one-off revenue to MRR
- Showing an annual payment in a single month
- Counting taxes as revenue
- Showing canceled subscriptions as active
- Counting package downgrades as churn
- Ignoring discounts in the calculation
What Should You Track with MRR?
Alongside MRR, track ARR, ARPU, CAC (customer acquisition cost), LTV (customer lifetime value) and MRR payback period.
A simple MRR report has: starting MRR, new MRR, expansion MRR, contraction MRR, churn MRR, net new MRR and ending MRR. Small businesses can track this in a spreadsheet; as the customer count grows, automated systems help.
Frequently Asked Questions
What does MRR mean?
Monthly recurring revenue.
How do I add an annual subscription to MRR?
Divide the annual fee by 12.
Is a one-off setup fee included in MRR?
No.
Are taxes included?
No.
Are MRR and turnover the same?
No. MRR is only the regular, recurring part of revenue.
Are MRR and cash flow the same?
No. Timing of payments differs from monthly recognition.
What is expansion MRR? Contraction MRR? Churn MRR?
Expansion is extra revenue from existing customers, contraction is revenue lost through downgrades, churn is revenue lost through cancellations.
What does negative net new MRR mean?
Losses (churn and contraction) are larger than gains; MRR is shrinking.
Can e-commerce companies calculate MRR?
Only for the portion that is subscription-based or recurring.
Is a high MRR always good?
Not always; look at churn, retention and the quality of growth too.
Is MRR used in company valuation?
Yes, especially for subscription businesses, together with growth and churn.
Use MRR as a Growth-Quality Indicator, Not Just Revenue
Monthly Recurring Revenue is a core performance indicator that measures the regular income of subscription-based businesses. Tracked together with its movements (new, expansion, contraction and churn), ARPU, NRR, CAC and LTV, it shows not only how much a business earns but how healthy its growth is.
