SaaS Metrics

Monthly Recurring Revenue (MRR)

Definition

Monthly recurring revenue (MRR) is the predictable, normalized revenue a subscription business earns every month. It includes all active subscriptions converted to a monthly value, excluding one-time charges, and serves as the core growth metric for SaaS companies.

Formula

MRR = Sum of (Monthly subscription value for each active customer)

Overview

Monthly recurring revenue (MRR) is the single most important top-line metric for any subscription-based business. It normalizes every plan, whether billed monthly, quarterly, or annually, into a single monthly figure so founders and investors can track growth consistently.

MRR is typically broken into five components: new MRR (from first-time customers), expansion MRR (upgrades and add-ons), reactivation MRR (returning customers), contraction MRR (downgrades), and churned MRR (cancellations). Tracking each component separately reveals whether growth is healthy or masking underlying retention problems.

For early-stage SaaS startups, crossing $10K MRR is often the first milestone that signals product-market fit. Investors at the seed stage generally look for consistent month-over-month MRR growth of 15 to 20 % as a sign the business can scale.

Example

A SaaS tool with 200 customers paying $50/month and 50 customers on an annual plan of $960/year ($80/month equivalent) has an MRR of (200 × $50) + (50 × $80) = $14,000.

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