All terms
Finance
MRR (Monthly Recurring Revenue)
The predictable revenue a business expects to receive every month from active subscriptions, normalised to a monthly amount.
In plain English
What you'd bill this month if every paying customer stayed exactly the same. The North Star of any subscription business.
Example
20 customers on $50/mo plans + 5 customers on $200/mo annual plans (billed $2,400/year = $200/mo equivalent) = $1,000 + $1,000 = $2,000 MRR.
Formula
MRR = Σ (active subscription value normalised to a monthly cadence) Annual plans count as (annual price / 12). One-off purchases and usage spikes do NOT count.
Why it matters
MRR turns lumpy revenue into a smooth line that compounds. Growth rate of MRR is the single best predictor of valuation in SaaS. Investors price you off it; founders manage to it.
Common mistakes
- Counting one-off setup fees, professional services, or overages in MRR
- Forgetting to remove churned and paused subscriptions
- Annualising MRR by ×12 and calling it ARR before accounting for churn