MRR: definition, calculation and related SaaS metrics
Updated on February 22, 2026
Quick definition
MRR (Monthly Recurring Revenue) is the monthly recurring revenue representing the sum of predictable subscription revenues generated each month by all active customers. MRR is the reference metric for assessing the financial health, growth and predictability of a SaaS company.
How it works
Formula
MRR = Sum of monthly subscriptions of all active customers (annual subscriptions divided by 12)
Example: 200 customers at €30/month + 50 customers at €80/month = 6,000 + 4,000 = €10,000 MRR. Net New MRR = New MRR + Expansion MRR − Contraction MRR − Churn MRR.
MRR breaks down into several essential sub-metrics:
- New MRR: MRR generated by new customers this month
- Expansion MRR: additional MRR generated by upsells and upgrades
- Contraction MRR: MRR lost due to downgrades
- Churn MRR: MRR lost due to cancellations
- Net New MRR: New MRR + Expansion MRR − Contraction MRR − Churn MRR
A positive Net New MRR indicates growing recurring revenue. Some companies also track the SaaS Quick Ratio: (New MRR + Expansion MRR) / (Churn MRR + Contraction MRR) — a ratio above 4 is considered excellent.
For annual subscriptions, normalise to monthly: MRR = Annual price / 12.
Why it matters
MRR is the fundamental metric for SaaS because it reflects the predictability of future revenues. Unlike one-off revenue, MRR provides a clear monthly view of financial health and allows revenue projection 6 to 12 months ahead.
It is also the central metric for investors: SaaS valuation multiples are calculated as a multiple of MRR or ARR.
Tracking MRR components reveals whether growth is healthy (driven by acquisition and expansion) or fragile (masking high churn offset by new customers).
How to improve or use it
- 1Reduce churn rate: dropping monthly churn from 5% to 3% can double MRR over 12 months without acquiring a single new customer.
- 2Develop Expansion MRR via in-app nudges to higher plans and contextual add-on offers.
- 3Increase ARPU of existing customers via upsell and cross-sell.
- 4Track Net New MRR weekly to detect weak signals before month-end.
- 5Target high-LTV segments to maximise the impact of each new customer acquired.
With Sublim
Sublim helps you analyse the behaviour of churning users to identify early warning signals: drop in login frequency, help pages visited, unused features. By detecting these signals upstream, your team can intervene proactively to reduce Churn MRR — in a GDPR-compliant environment.
Frequently asked questions
What is the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) measures recurring revenue on a monthly basis. ARR (Annual Recurring Revenue) is simply MRR multiplied by 12, providing an annual view of recurring revenue. ARR is often used by B2B SaaS with annual contracts, while MRR is more common in SaaS with monthly subscriptions.
How do I calculate MRR for prepaid annual subscriptions?
To normalise annual subscriptions into MRR, divide the annual price by 12: an annual subscription of €1,200 represents €100 of MRR. This normalisation is essential to compare customers with different subscription periods and obtain a coherent MRR. Note: MRR reflects recurring contractual value, not actual cash collected in the month.
What is negative MRR (Negative Churn)?
Negative Churn occurs when Expansion MRR exceeds Churn MRR: upsells and upgrades from existing customers more than offset cancellations. It is a sign of excellent SaaS health: even without acquiring new customers, MRR grows naturally thanks to expansion of the existing base. This is the ultimate goal of a well-executed Customer Success strategy.
Related terms
ARR (Annual Recurring Revenue) is the annual recurring revenue that re…
Churn rate (or attrition rate) is the percentage of customers or subsc…
LTV (Lifetime Value), or customer lifetime value, is the total revenue…
ARPU (Average Revenue Per User) is the average revenue per user that m…