MRR (Monthly Recurring Revenue): How to Calculate It and What Not to Count
MRR, or monthly recurring revenue, is the amount of money your active subscriptions bring in each month, with every plan converted to a monthly figure. A yearly plan is divided by twelve, and one-off charges, setup fees and unpaid trials are left out. It tells you the size of your recurring base today, not how much cash arrived this month.
How do you calculate MRR?
Add up what each active subscriber pays per month. For a customer on a monthly plan, that is their monthly price after any discount they actually receive. For a customer on a yearly plan, divide the yearly price by twelve. Customers on a free plan or a trial that has not converted contribute nothing, because MRR counts money you can expect, not people you hope to convert.
| Customer group | How many | They pay | Counts toward MRR |
|---|---|---|---|
| Monthly plan | 20 | $9 a month | $180 |
| Yearly plan | 4 | $90 a year | 4 × $7.50 = $30 |
| Free plan | 35 | $0 | $0 |
| One-off setup help | 2 | $60 once | $0, it does not recur |
| Total MRR | $210 |
Notice what did not count. The 35 free users are not revenue yet. The setup fees were real cash, but they will not repeat next month, so they stay out of MRR and belong in a separate line for one-time revenue. Keeping the two apart is what lets you read the number as a trend.
What moves MRR up and down each month?
A single number hides the story, so break monthly change into movements. New MRR comes from customers who started paying. Expansion MRR comes from existing customers who moved to a bigger plan or added seats. Contraction MRR is the opposite, a downgrade. Churned MRR is revenue from customers who left, and its share of the starting figure is the revenue churn. Net new MRR is the first two minus the last two.
| Movement | MRR change |
|---|---|
| MRR at the start of the month | $210 |
| New customers | + $54 |
| Expansion (two upgrades) | + $12 |
| Contraction (one downgrade) | − $6 |
| Churned (two cancellations) | − $18 |
| MRR at the end of the month | $252 |
Net new MRR is $42 here, and a reader can see that new sales did the work while two cancellations took a slice. If you write “MRR grew 20%” without the breakdown, nobody can tell whether the product is sticky or the sales are just outrunning the leaks.
How do you track MRR with a handful of customers?
A spreadsheet is enough. One row per subscription, with the plan name, the monthly equivalent, the start date and an end date if it has one. Sum the monthly column for rows with no end date. Add a second sheet for monthly movements, and at the end of each month write the five lines above. Check the total against your payment processor’s subscription list so the two cannot drift apart without you noticing.
When the first customer arrives is a milestone worth planning for. The playbook on getting your first paying customer covers reaching it, and launching before you have revenue is for the stretch before. Until you have any recurring payments, MRR is zero, and it is more honest to say so than to quote a projected figure.
What should never be counted in MRR?
- One-off sales. Setup fees, consulting, a lifetime deal and a paid template are not recurring, however much cash they bring.
- Unpaid trials. A person who has not been billed is not a subscriber. Count them when the first payment clears.
- Annual payments as a full month. If someone pays a year up front, you receive twelve months of cash in one month, but only one twelfth belongs to this month’s MRR.
- Discounts you did not give. Use the amount actually billed, not the price on the pricing page.
- Projected or hoped-for revenue. MRR is what is in force now.
MRR is also not profit, and it is not cash in the bank. Payment processing fees, taxes, refunds and your own costs sit between the number and your pocket. It answers one question: how large is the recurring base?
How does MRR fit with the other numbers?
ARR is the same base viewed annually, and it makes more sense for annual contracts. Bootstrapping makers tend to watch MRR against monthly costs, because the day recurring revenue exceeds what the product costs to run is a real milestone. When you launch your product free, the free launch brings visitors, and MRR is what you measure if some of them decide to pay later.
For a sense of what people ask makers to build around a monthly fee, see the finance app ideas on the board. Whatever you choose, quote MRR with its date and the definition above, so a reader knows what the figure includes.
Frequently asked questions
What does MRR stand for?
MRR stands for monthly recurring revenue. It is the monthly value of all active subscriptions, with yearly plans divided by twelve and one-time charges excluded. The figure describes the recurring base you have right now, which is why it is quoted with a date and shown alongside churn and new revenue.
How do I include annual plans in MRR?
Divide the annual price by twelve and count that amount each month while the subscription is active. A customer paying 90 dollars for a year adds 7.50 to MRR every month, even though the cash arrived all at once. Do not count the full yearly payment in the month it lands.
Is MRR the same as monthly revenue?
No. Monthly revenue includes everything you were paid that month, such as one-off fees and annual payments. MRR counts only recurring subscription value, converted to a monthly amount. A month with a big setup fee can show high revenue and flat MRR, and the difference is why the two are tracked separately.
When should a new product start tracking MRR?
From the first paying subscriber. Before that, MRR is zero, and quoting forecasts as MRR confuses readers. Set up the spreadsheet with a column for monthly equivalent and a column for end date at the beginning, so the movements between months are easy to record later.
Written by Post your build ideas with AI assistance and edited for this site. Where a page names another product, the facts came from that product’s own pages on the date shown above; terms change, so check them before you rely on them. About the publisher.