How do you calculate MRR?

Calculate MRR by multiplying the number of customers by the average revenue per customer per month. For example: 100 customers paying $29/month = $2,900 MRR. For annual plans, divide by 12 (customer paying $348/year = $29 MRR). Add all recurring monthly revenue together to get total MRR.

Why is MRR tracking important?

MRR tracking is important because it shows your business's financial health and growth trajectory. Unlike one-time sales, MRR is predictable revenue you can count on each month. It helps you forecast cash flow, measure growth rate, identify churn problems, and make data-driven decisions about hiring, marketing spend, and product development.

What's the difference between MRR and ARR?

MRR (Monthly Recurring Revenue) is recurring revenue per month. ARR (Annual Recurring Revenue) is recurring revenue per year. ARR = MRR × 12. Use MRR for early-stage companies and monthly planning. Use ARR when selling to enterprise customers or reporting to investors. Both measure the same thing at different time scales.

What is MRR Tracking?

MRR (Monthly Recurring Revenue) tracking is the process of measuring your business's predictable monthly income from subscriptions. It shows your recurring revenue normalized to a monthly amount, helping you understand growth trends, forecast revenue, and make business decisions. Unlike one-time sales, MRR represents sustainable, predictable revenue that repeats each month.

How to Calculate MRR

The basic MRR formula is simple:

MRR Formula

MRR = Number of Customers × Average Revenue Per Customer Per Month

Example MRR Calculations

Scenario	Calculation	MRR
100 customers at $29/month	100 × $29	$2,900
50 customers at $99/month	50 × $99	$4,950
10 customers at $348/year	10 × ($348 ÷ 12)	$290
Mixed: 60 monthly + 20 annual	(60 × $29) + (20 × $29)	$2,320

Types of MRR

There are several MRR metrics that help you understand different aspects of your business:

New MRR

Recurring revenue from new customers this month

Example: 5 new customers × $29 = $145 New MRR

Expansion MRR

Additional revenue from existing customers upgrading

Example: 3 customers upgrade from $29 to $99 = $210 Expansion MRR

Churned MRR

Lost revenue from customers who canceled

Example: 2 customers cancel at $29 = -$58 Churned MRR

Contraction MRR

Lost revenue from customers downgrading

Example: 1 customer downgrades from $99 to $29 = -$70 Contraction MRR

Net New MRR Formula

Net New MRR = New MRR + Expansion MRR - Churned MRR - Contraction MRR

This is your actual month-over-month MRR growth

Why MRR Tracking Matters

1. Predictable Revenue Forecasting

Unlike businesses with one-time sales, subscription companies can predict future revenue with high accuracy. If you have $10,000 MRR with 5% monthly growth, you can forecast:

Month 2: $10,500 MRR
Month 3: $11,025 MRR
Month 12: $17,959 MRR

2. Measure Business Health

MRR growth rate shows if your business is healthy:

Negative growth: You're losing customers faster than gaining them (crisis)
0-5% monthly: Slow growth, review customer acquisition
5-10% monthly: Healthy SaaS growth
10%+ monthly: Excellent growth trajectory

3. Make Data-Driven Decisions

MRR helps you answer critical questions:

Can we afford to hire a new salesperson? (Need +$5,000 MRR)
Should we increase marketing spend? (Look at New MRR trend)
Is our pricing too low? (Compare to industry benchmarks)
Are customers staying? (Track Churned MRR percentage)

How to Track MRR Automatically

Manual MRR tracking in spreadsheets is time-consuming and error-prone. Use software that calculates MRR automatically:

Lead16 Auto-Tracks MRR

✓ Automatically calculates MRR from recurring invoices
✓ Shows New, Expansion, and Churned MRR breakdown
✓ Displays MRR growth charts and trends
✓ Tracks MRR by customer and plan
✓ No manual calculations or spreadsheets needed

Try MRR Tracking Free See MRR Features

MRR vs Revenue vs ARR

MRR vs Total Revenue

MRR only includes recurring revenue. It doesn't include:

One-time setup fees
Professional services
One-off sales
Variable usage charges (unless predictable)

Example: You invoice $15,000 this month ($10,000 recurring subscriptions + $5,000 one-time setup fees). Your MRR is $10,000, not $15,000.

MRR vs ARR

Metric	Best For	Example
MRR	Early-stage SaaS, month-to-month plans, operational planning	$10,000/month
ARR	Enterprise SaaS, annual contracts, investor reporting	$120,000/year

Common MRR Tracking Mistakes

Mistake 1: Including One-Time Revenue

❌ Wrong: Customer pays $1,000 setup fee + $100/month subscription = $1,100 MRR
✓ Right: MRR is $100 (only recurring part)

Mistake 2: Not Normalizing Annual Plans

❌ Wrong: Customer pays $1,200/year in January = $1,200 MRR in January, $0 other months
✓ Right: $1,200 ÷ 12 = $100 MRR every month

Mistake 3: Ignoring Churn

❌ Wrong: Only tracking new customers added
✓ Right: Track New MRR AND Churned MRR to get Net New MRR

MRR Benchmarks by Industry

Good MRR Growth Rates (Monthly):

Early Stage (0-$10k MRR): 10-20% is excellent
Growth Stage ($10k-$100k MRR): 5-10% is healthy
Scale Stage ($100k+ MRR): 3-5% is solid

Frequently Asked Questions

Should I track MRR if I have mostly one-time sales?

Only track MRR if at least 30% of your revenue is recurring. If you have mostly one-time sales, focus on total revenue and customer lifetime value instead.

Do I include free trial users in MRR?

No. Only include paying customers. Track trial-to-paid conversion separately. Once a trial converts, add them to MRR.

How often should I check MRR?

Check MRR daily if you're early stage (under $10k MRR) to spot trends quickly. Weekly is fine for $10k-100k MRR. Monthly for larger companies. Always check after major marketing campaigns or price changes.

Can I use MRR to value my company?

Yes, roughly. SaaS companies often sell for 3-10x ARR (or 36-120x MRR) depending on growth rate, churn, and profitability. A company with $50,000 MRR ($600k ARR) growing 10%/month might be valued at $3-6 million. But valuation depends on many factors beyond MRR.

Getting Started with MRR Tracking

List all recurring customers and their monthly payment amounts
Normalize annual plans by dividing by 12
Add them up to get current MRR
Set up automatic tracking (use Lead16 or similar)
Track monthly changes (new, expansion, churned)
Review weekly and adjust strategy based on trends

Start Tracking MRR Today

Lead16 automatically calculates and tracks your MRR from recurring invoices. No spreadsheets, no manual calculations.

Get Free MRR Tracking →