Monthly recurring revenue (MRR) is a metric that tracks subscription-based businesses’ income on a monthly basis. It is calculated by taking the total subscription revenue for a month and dividing it by the number of active subscribers at the end of that month.

This metric is especially important for subscription businesses because it gives a snapshot of their growth and shows how much they’re earning each month, and also serves as a predictor of future business.

If your revenue is flat or you’re struggling to grow, it could be because your retention rates are too low. If your MRR is growing at a healthy rate month-over-month (in other words, you’re adding more subscribers than you’re losing), then your business is doing well.

Here’s how to calculate MRR:

  1. Start by calculating your total subscription revenue for a month. This includes one-time and recurring payments from customers.
  2. Next, count the number of active subscribers at the end of that month. Subscribers may remain active even if their payment is overdue and you’re still within the 30-day grace period. You can include any free trials that result in subscribers becoming paid accounts at the end of their trial periods.
  3. Divide your monthly revenue by your number of active subscribers to calculate MRR for that month.

For example, if your total subscription revenue for the month is $10,000 and you have 100 active subscribers at the end of the month, your MRR would be $100.

It’s important to note that MRR doesn’t take into account churn (the number of subscribers who cancel their subscriptions each month). You can calculate churn to see whether it’s a bigger problem for your business.

Most businesses calculate MRR as a monthly metric, because that’s how their customers pay them. In other words, you charge all subscribers on the same day every month, and at the end of each calendar month you review those numbers to determine MRR.

However, if you charge customers on a different schedule, you may need to adjust your calculations accordingly.

For example, if subscribers are charged every three months instead of monthly, then their first payment would come at the end of 3 months (or 1 quarter) instead of the end of one month. This means that your MRR for each quarterly period is higher than the MRR for each monthly period, because it includes three months of subscription revenue instead of one month.

You should also keep in mind that subscribers who upgrade their subscriptions (e.g., from a basic plan to a premium plan) during a month will be counted as active subscribers for the entire month. This means that the MRR you calculate will include revenue from multiple, different-sized subscriptions. For example, if you have 20 subscribers on a $20/month plan and 10 subscribers on a $40/month plan at the end of the month, then your MRR for that month would be $50 (not $60).

Once you understand how to use MRR as a metric, you can start using it to make business improvements. For example, if your MRR is growing significantly but you’re having trouble attracting new subscribers, then you could focus on retaining and upselling existing customers. If subscribers are leaving and not being replaced quickly enough, then you should work on improving acquisition.

MRR is an important metric for subscription businesses because it shows how much revenue they’re generating each month.

Calculating MRR is simple – just divide total subscription revenue by the number of active subscribers.

  • MRR is especially useful for predicting future business growth.
  • If your MRR is growing healthy, then your business is doing well!