Monthly Recurring Revenue MRR
What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is a key sales metric that measures the predictable and recurring revenue generated by a company's subscription-based products or services on a monthly basis.
Synonyms: Monthly Recurring Income, Monthly Subscription Revenue, Recurring Monthly Sales, Monthly Revenue Run Rate
Why MRR is Important
Monthly Recurring Revenue (MRR) is a crucial metric for subscription-based businesses and SaaS companies. It provides a clear picture of a company's financial health and growth potential. By focusing on MRR, businesses can:
- Predict future revenue streams
- Make informed decisions about resource allocation
- Evaluate the effectiveness of sales and marketing strategies
- Attract investors by demonstrating stable, predictable income
How to Calculate MRR
Calculating MRR is straightforward:
- Sum up the monthly fees paid by all active customers
- Include any recurring add-ons or upgrades
- Exclude one-time fees or charges
For example, if you have 100 customers paying $50 per month, your MRR would be $5,000.
Examples of MRR in Action
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Subscription Box Service: A company offers monthly beauty boxes for $25. With 10,000 subscribers, their MRR is $250,000.
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SaaS Platform: A software company has three pricing tiers: $10, $50, and $100 per month. With 500 customers in each tier, their MRR is (500 * $10) + (500 * $50) + (500 * $100) = $80,000.
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Streaming Service: A music streaming platform charges $9.99 per month. With 1 million subscribers, their MRR is $9,990,000.
Frequently Asked Questions
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Question 1: How is MRR different from ARR? Answer: MRR focuses on monthly revenue, while Annual Recurring Revenue (ARR) looks at yearly revenue. ARR is typically calculated by multiplying MRR by 12.
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Question 2: Should one-time fees be included in MRR? Answer: No, MRR should only include recurring revenue. One-time fees are excluded from this calculation.
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Question 3: How can a company increase its MRR? Answer: Companies can increase MRR by acquiring new customers, upselling existing customers, reducing churn, and implementing price increases.
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Question 4: Is MRR the same as monthly profit? Answer: No, MRR is a measure of revenue, not profit. It does not take into account the costs associated with providing the service or product.
