What is Monthly Recurring Revenue (MRR)?

Monthly Recurring Revenue (MRR) is a critical financial metric that measures the predictable and consistent revenue your business earns each month from active subscriptions. It’s particularly important for SaaS companies, subscription-based services, and businesses relying on recurring revenue models. MRR helps provide insight into your business’s financial health, track growth, and forecast future performance.

How to Calculate Monthly Recurring Revenue (MRR)?

Calculating MRR is relatively straightforward but requires a precise breakdown of your subscription-based revenue. Here's how you can do it:

1. Determine the Average Revenue Per User (ARPU): Start by calculating the average amount of revenue you receive from each user per month. For example, if you offer a $300/month plan, the ARPU is $300.

2. Count Your Active Subscribers: Next, determine how many active subscribers are paying for your service each month. If you have 50 customers on the $300/month plan, that's 50 subscribers.

3. Multiply ARPU by the Number of Subscribers: To get your MRR, simply multiply the ARPU by the total number of paying customers each month.

Example Calculations

If you have 50 subscribers paying $300/month: MRR = 50 subscribers x $300 = $15,000.

For businesses with a variety of pricing plans, the calculation remains the same. Just multiply the number of subscribers on each plan by the monthly price, then sum it all up.

Example of MRR Calculation with Multiple Plans

If your business offers different pricing tiers like the following:

• 100 subscribers on the $100/month plan

• 50 subscribers on the $200/month plan

• 25 subscribers on the $400/month plan

The MRR calculation would be:

• 100 x $100 = $10,000

• 50 x $200 = $10,000

• 25 x $400 = $10,000

Total MRR = $30,000.