What is MRR? Monthly recurring revenue explained with examples
What monthly recurring revenue means, how to calculate it for monthly and annual plans, and what does not count as MRR.
MRR stands for monthly recurring revenue. It is the amount of subscription revenue a business can expect every month from the customers it has right now, with every plan converted to a monthly figure. It is the main number subscription businesses use to judge whether they are growing, because it ignores one-off spikes and only counts revenue that repeats.
The basic formula
Add up the monthly value of every active subscription. If all your customers are on the same monthly plan, that is simply the number of paying customers multiplied by the monthly price.
MRR = sum of the monthly value of every active paid subscription
For example, 12 customers paying $15 a month give you $180 of MRR.
Annual and quarterly plans
A customer on a yearly plan pays once, but MRR spreads that payment across the months it covers. Divide the plan price by the number of months in the billing period.
| Plan | Price | MRR from one customer |
|---|---|---|
| Monthly | $15 per month | $15 |
| Quarterly | $39 every 3 months | $13 |
| Annual | $120 per year | $10 |
This is why a month with several annual sales can show a lot of cash in the bank and only a small rise in MRR. Both numbers are true, and they answer different questions: cash tells you what you can spend, while MRR tells you what will come back next month.
What does not count as MRR
- One-time payments, such as a setup fee, a lifetime deal or a single paid template.
- Free trials until the first paid period actually starts.
- Failed or refunded payments. A subscription that has not been paid is not revenue yet.
- Discounts at full price. If a customer pays $10 instead of $15 for the first three months, they add $10 of MRR during those months.
- Irregular usage charges, unless you have a consistent way of averaging them. Many founders keep usage revenue separate so MRR stays predictable.
The four ways MRR moves
Total MRR hides what happened during the month. Splitting the change into four parts shows whether growth comes from new customers or from keeping the ones you have.
| Movement | What it means | Example |
|---|---|---|
| New MRR | Subscriptions from new customers | 3 new customers at $15: +$45 |
| Expansion MRR | Existing customers paying more | One upgrade from $15 to $30: +$15 |
| Contraction MRR | Existing customers paying less | One downgrade from $30 to $15: −$15 |
| Churned MRR | Customers who cancelled | 2 cancellations at $15: −$30 |
In this example, net new MRR for the month is $45 + $15 − $15 − $30 = $15. Total MRR went up, but most of the new revenue was cancelled out by people leaving, which is a churn problem to fix before spending more on getting new customers.
MRR, ARR, revenue and profit
ARR, annual recurring revenue, is MRR multiplied by 12. It is used more often once a business is larger or sells mostly yearly contracts.
Revenue is everything you billed during a period, including one-time payments. Profit is what remains after costs. MRR says nothing about costs, so a business can grow MRR and still lose money.
Payment fees also sit between MRR and what reaches your account. Card processors charge a fee on each payment; Stripe’s standard US card rate, for example, is listed on its pricing page. Mobile app stores take a commission on subscriptions sold through them. Most founders report MRR before these fees and track the fees separately.
Your first MRR
The first time this number is above zero because a stranger subscribed, you have something no plan or pitch can give you: evidence that the product is worth paying for again next month. If you are still working towards that point, start with how to get your first MRR.