Monthly recurring revenue (MRR)

Monthly Recurring Revenue (MRR) gives you a clear picture of the predictable income your business can expect to generate each month from active subscriptions. It’s a key metric for understanding your financial health and stability.

What is Monthly Recurring Revenue (MRR)?

MRR is the total predictable revenue your business expects to earn over the next 30 days from all active subscriptions, excluding any revenue from frozen or inactive accounts. It’s calculated by summing the monthly subscription value of your active customers. Here’s what it includes:

Monthly subscriptions: The value of regular payments from customers who subscribe to your service on a monthly basis.
Annual subscriptions (amortized monthly): The value of annual payments divided into monthly amounts to provide a consistent monthly revenue figure.
Usage charges (optional): Predictable fees based on customer usage, if these charges are regular and consistent enough to forecast future revenue.

Note: MRR is not the same as trailing 30-day revenue, which reflects the revenue earned over the past 30 days. MRR focuses on the expected revenue for the upcoming 30 days, providing a forward-looking view.

Why is MRR important?

MRR is important because it provides a steady view of your revenue stream, helping you make better business decisions. Here’s why it matters:

Predictable income: MRR gives you a reliable forecast of your income, making it easier to plan and budget.
Performance tracking: Monitoring MRR helps you track your business growth and identify trends.
Investor appeal: Consistent MRR growth can make your business more attractive to investors, as it shows stable and predictable income.
Customer retention: Understanding MRR can help you focus on retaining customers and reducing churn.

Actions you can take with MRR insights

Focus on customer retention: Work on strategies to keep your current subscribers, such as improving customer support or offering loyalty rewards.
Identify upsell opportunities: Look for opportunities to offer add-ons or upgraded plans to existing customers to increase MRR.
Optimize pricing: Use MRR data to refine your pricing strategy, ensuring it aligns with customer demand and market conditions.
Plan for growth: Use your MRR to set realistic growth targets and allocate resources effectively.

By understanding and regularly monitoring your MRR, you can make informed decisions that help your business grow steadily. Keeping an eye on this metric ensures your business remains financially healthy and ready to seize new opportunities.