# Monthly Recurring Revenue

**Acronym:** MRR  
**Category:** metrics  
**Short Description:** The normalized total of predictable subscription revenue a business earns each month.  
**Last Updated:** 2026-06-09T00:00:00Z

## 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.

## Formula

**Formula:** `MRR = Active Subscribers × ARPA`
**Result Unit:** $

The normalized recurring revenue you earn each month.

## Calculation

**Formula:** `MRR = Active Subscribers × Average Revenue Per Account (ARPA)`

**Explanation:** 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.

### Components

- **Active Subscribers**: Number of paying customers with active recurring subscriptions in the month
- **Average Revenue Per Account**: Average normalized monthly subscription value per account (ARPA)

## 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

## How AdSights Helps

**Tracking 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.

## FAQs

### 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.

## Related Terms

### Parent Terms

- **[Annual Recurring Revenue (ARR)](/resources/glossary/metrics/annual-recurring-revenue-arr)**: ARR is MRR annualized (MRR × 12)

### Similar Terms

- **[Net Revenue Retention (NRR)](/resources/glossary/metrics/net-revenue-retention-nrr)**: NRR is computed from expansion, contraction, and churned MRR of existing customers
- **[Average Order Value (AOV)](/resources/glossary/metrics/average-order-value-aov)**: ARPA is the subscription analogue of AOV for recurring revenue

### Component Terms

- **[Churn Rate](/resources/glossary/metrics/churn-rate-cr)**: Churned MRR is the revenue lost from cancellations and downgrades