Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is a key metric for subscription-based businesses, representing the predictable revenue generated from customers on a monthly basis. It's a crucial indicator of a company's financial health and growth.
How to Calculate MRR
The basic formula for calculating MRR is:
MRR = Average Revenue Per User (ARPU) * Total Number of Customers
For example, if you have 100 customers paying $100 per month, your MRR would be $10,000.
Importance of MRR
Predictability: MRR provides a clear picture of expected monthly revenue.
Growth measurement: Tracking MRR over time helps assess business growth.
Investor valuation: MRR is a key metric for investors evaluating SaaS companies.
Pricing optimization: Analyzing MRR can help optimize pricing strategies.
Beyond Basic MRR
While the basic MRR calculation is helpful, there are additional factors to consider:
Churn: Customer churn can negatively impact MRR.
Expansions and upgrades: Increases in revenue from existing customers can boost MRR.
Contractions and downgrades: Decreases in revenue from existing customers can reduce MRR.
Annual contracts: Convert annual contracts to monthly equivalent for accurate MRR calculation.
By accurately calculating and tracking MRR, businesses can make informed decisions about pricing, customer retention, and overall growth strategy.
Start sourcing valid professional emails.
Prove your prospecting KPIs. Meet your sales quota.