Marketing Metrics

Monthly Recurring Revenue

The normalized total of predictable subscription revenue a business earns each month.

Definition

Monthly Recurring Revenue (MRR) is the normalized total of predictable, recurring subscription revenue a business earns in a given month, with one-time and non-recurring charges removed and all plans converted to a monthly equivalent. MRR is decomposed into movements — new MRR, expansion MRR, contraction MRR, and churned MRR — whose net change (the MRR bridge) is the clearest operating signal of growth momentum in a subscription business.

Examples

200 customers at an average $500/month = $100,000 MRR

An annual plan of $1,200 contributes $100 to MRR ($1,200 ÷ 12)

MRR bridge: starting $100k + $12k new + $6k expansion − $3k contraction − $4k churn = $111k ending MRR

Calculation

How to Calculate

Sum the normalized monthly value of every active subscription, or equivalently multiply the number of active accounts by average monthly revenue per account. Annual plans are divided by 12 to express a monthly equivalent. The period-over-period change is built from new + expansion − contraction − churned MRR.

Formula

MRR = Active Subscribers × Average Revenue Per Account (ARPA)

Unit of Measurement

Operation Type

multiply

Formula Variables

Active SubscribersCount of paying accounts with active subscriptions in the month

ARPAAverage normalized monthly recurring revenue per account

Comparison

Related Metrics

Customer Lifetime Value (CLV)

Customer Lifetime Value predicts the total revenue a business can expect from a single customer account throughout the entire business relationship. This metric is crucial for determining sustainable customer acquisition costs, optimizing marketing spend, and identifying high-value customer segments. CLV helps businesses make informed decisions about customer acquisition and retention investments.

Average Order Value (AOV)

Average Order Value (AOV) is a critical e-commerce metric that measures the typical monetary value of each completed transaction by calculating the mean purchase amount across all orders in a given period. This metric is essential for evaluating sales performance, pricing strategies, and the effectiveness of upselling/cross-selling initiatives.

Churn Rate (CR)

Churn rate measures the proportion of customers who discontinue their relationship with a company during a specific timeframe. For subscription businesses, this means cancellations or non-renewals. For non-subscription businesses, churn is often defined as no purchase activity within a set period. It's a critical metric for evaluating customer retention and business health.

Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) is the normalized, annualized value of the predictable subscription revenue a business expects from its active contracts over a 12-month period. It counts only recurring components — subscription fees, recurring add-ons, and committed expansion — and excludes one-time charges such as setup fees, professional services, or usage overages. ARR is the headline growth metric for subscription and SaaS businesses because it expresses the run-rate of the revenue base independent of billing cadence, and it underpins valuation multiples, the Rule of 40, and net revenue retention analysis.

Net Revenue Retention (NRR)

Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), measures how much recurring revenue a business retains and grows from its existing customer base over a period — including expansion (upsell, cross-sell, price increases) and net of contraction and churn — while excluding revenue from net-new customers. An NRR above 100% means the existing base grows on its own even before any new sales, which is why it is widely regarded as the single most important growth and durability metric for modern SaaS.

How AdSights helps you track Monthly Recurring Revenue

New MRR is the acquisition engine's output. AdSights traces which creative and audience combinations generate paying sign-ups that stick, so growth teams can grow new and expansion MRR without simply buying churn-prone accounts. By tying ad-variant performance to the MRR movements that follow, teams reallocate spend toward the campaigns that build net-new recurring revenue rather than the ones that pad trial counts.

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Frequently asked questions

Common questions about Monthly Recurring Revenue, answered.

What is Monthly Recurring Revenue (MRR)?

MRR is the normalized, predictable subscription revenue a business earns each month, with one-time fees stripped out and all plans converted to a monthly equivalent. It's the heartbeat metric of a subscription business — a single number that captures the recurring revenue base and, through its month-over-month movements, the momentum of growth.

What is the MRR bridge (movement analysis)?

The MRR bridge decomposes the change in MRR into four movements: new MRR (from new customers), expansion MRR (upgrades, cross-sells, seat additions), contraction MRR (downgrades), and churned MRR (cancellations). Net new MRR = new + expansion − contraction − churned. Reading these components separately reveals whether growth is driven by acquisition or by retaining and expanding existing customers — and where the leaks are.

How do I normalize annual plans into MRR?

Divide the annual contract value by 12 to express its monthly equivalent. A $1,200/year plan contributes $100 to MRR. Normalizing this way keeps MRR comparable across customers regardless of whether they pay monthly or annually, so the metric reflects the true recurring run-rate rather than the timing of payments.

What's a healthy MRR growth rate?

It depends heavily on stage: early-stage startups often target double-digit month-over-month growth, while larger companies measure growth in annual percentage terms. More important than the headline rate is the composition — sustainable growth leans on expansion and low churn, not just new sales. Net revenue retention above 100% means the existing base grows MRR on its own, which is the hallmark of durable subscription growth.