What is monthly recurring revenue (MRR)?
Monthly recurring revenue (MRR) is a metric that measures the predictable revenue that a business can expect to receive on a monthly basis from all the active subscriptions.
MRR is crucial because it provides a clear and predictable measure of a business's revenue stream, and can be used to track growth and identify trends over time.
How to calculate monthly recurring revenue (MRR)?
To calculate monthly recurring revenue, multiply the ‘number of monthly active subscribers’ by the ‘average revenue per user’ (ARPU) per month. While calculating MRR, be careful to not include any one-time fees.
Formula for calculating monthly recurring revenue (MRR)
Real-life example of monthly recurring revenue (MRR)
Let’s say you run an internal team communication SaaS business. Your SaaS has 100 active subscribers and each subscriber pays an average of $50 per month.
Then, your monthly recurring revenue would be: 100 x 50 = $5,000
What’s considered a good monthly recurring revenue (MRR)? (benchmark)
There is no "one-size-fits-all" MRR rate that is good for all businesses. The ideal MRR for a business will depend on a variety of factors, including the type of business, the size of the market, the competition, and the business's goals and objectives.
A net MRR growth rate of 10-20% is considered good by industry experts. A higher MRR is generally better for you, as it provides a more predictable and stable revenue stream. So, you should strive to achieve a higher MRR than where it is now.
Ways to increase your monthly recurring revenue (MRR)
- Expand your customer base: Growing your customer base by attracting new customers through marketing and sales efforts will give you more monthly users hence, increasing your MRR. Read this guide on: Ways to Grow Your Customer Base
- Offer a range of pricing tiers: Offering a range of pricing plans for your product or service will allow your customers to choose the option that best fits their needs and budget. Make sure to include your most valuable features in the premium plan and influence people to purchase that plan.
- Considering adding new features: Adding new features or functionality to your product or service can make it more valuable to customers and increase their willingness to pay, giving you an increase in the ARPU and ultimately a higher MRR.