SaaS Metric
Monthly Recurring Revenue (MRR)
Definition
Monthly recurring revenue (MRR) is the predictable subscription revenue a business earns each month, normalised to a monthly figure. MRR = sum of all active subscriptions normalised to monthly value. It moves through five components: new, expansion, reactivation, contraction and churned MRR — and tracking each tells you what is actually driving growth.
Formula
MRR = Σ (each active subscription normalised to its monthly value) Net new MRR = new + expansion + reactivation − contraction − churned
Benchmark
MRR has no single benchmark; what matters is consistent net-new MRR growth and a healthy mix where expansion and new outweigh contraction and churn.
The five MRR movements
New MRR comes from new customers. Expansion MRR comes from existing customers upgrading or adding seats. Reactivation MRR comes from previously churned customers returning. Contraction MRR is revenue lost to downgrades. Churned MRR is revenue lost to cancellations.
Net new MRR = new + expansion + reactivation − contraction − churned. Decomposing MRR this way is the foundation of almost every other subscription metric, from the quick ratio to NRR.
Normalising to monthly
Annual and multi-year plans must be normalised: a $1,200 annual plan contributes $100 of MRR, not $1,200 in the signup month. Getting normalisation right is the most common source of MRR reporting errors.
Frequently asked questions
How do you calculate MRR?
Sum every active subscription normalised to its monthly value. A $1,200/year plan contributes $100 MRR. Track the movement components — new, expansion, reactivation, contraction, churned — to see what drives net new MRR.
What is the difference between MRR and ARR?
ARR (annual recurring revenue) is simply MRR × 12. MRR is the more granular monthly view; ARR is the annualised figure usually quoted for larger or enterprise-focused businesses.
Related metrics
Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) is the normalised yearly value of recurring subscriptions. Learn the ARR formula, how it differs from MRR and total revenue, and when to use it.
Expansion Revenue
Expansion revenue is additional recurring revenue from existing customers via upgrades, seats and cross-sells. Learn how it drives net negative churn and NRR above 100%.
Churn Rate
Churn rate is the percentage of customers or revenue lost in a period. Learn the customer churn and revenue churn formulas, healthy SaaS benchmarks, and how to reduce it.
SaaS Quick Ratio
The SaaS quick ratio measures growth efficiency: new + expansion MRR divided by churned + contraction MRR. Learn the formula, what a ratio of 4+ means, and benchmarks.
Track this automatically
Connect Stripe and RetentionLens computes MRR for you — with cohorts, trends and churn-risk scoring. Start on the free tier.
Benchmarks are general SaaS ranges and vary by segment, stage and business model. Last reviewed 2026-05-30.