Monthly Recurring Revenue (MRR)

Monthly recurring revenue is the total predictable revenue your business generates from all active subscriptions in a single month, with all contracts normalized to their monthly equivalent.

MRR is the heartbeat metric for any subscription-based GTM operation. It tells you exactly how much revenue the business is generating on a recurring basis right now, making it the foundation for financial planning, investor reporting, and growth measurement.

MRR breaks down into several components that each tell an important story. New MRR comes from newly closed customers. Expansion MRR comes from existing customers upgrading or adding seats. Contraction MRR comes from downgrades. Churned MRR comes from customers who cancelled. Net new MRR = new + expansion - contraction - churn. If that number is positive, you’re growing.

For example, if you start the month with $500K MRR, close $60K in new deals, expand $25K from existing customers, lose $10K to downgrades, and $15K to churn, your end-of-month MRR is $560K with net new MRR of $60K.

An important detail: annual contracts need to be divided by 12 to normalize to MRR. A $120K annual deal contributes $10K MRR. Some teams also track ARR (annual recurring revenue = MRR x 12) for board reporting and valuation purposes.

Watch the composition of your MRR growth carefully. Healthy businesses see expansion MRR growing as a percentage of total new MRR over time. If you’re only growing through new logos and expansion is flat, you have a product value or customer success problem.

Analytics dashboards should display MRR trends and components prominently so the entire revenue team understands the trajectory.