MRR (Monthly Recurring Revenue) refers to a company’s monthly recurring revenue, which is generated from recurring payments made by customers. This metric is particularly relevant for subscription-based business models, especially in the SaaS (Software as a Service) sector.
MRR does not represent a month’s total turnover, but only the predictable, regularly recurring portion.
Typical sources of MRR are:
- Software subscriptions
- Memberships or subscription models
- recurring service contracts
- ongoing licence fees
This metric is particularly important for start-ups, as it allows for a high degree of predictability in revenue and thus makes it easier to assess a company’s financial stability.
MRR helps to answer key questions:
- How robust is the business model?
- How fast is the company growing?
- How do the customer base and turnover develop over time?
- How much future revenue has already been secured?
The MRR can be further broken down into various components:
- New MRR: Revenue from new customers
- MRR expansion: additional revenue from existing customers (e.g. upgrades)
- Churned MRR: lost revenue due to cancellations
- Net new MRR: Total change in recurring revenue
A growing MRR is a strong indicator of:
- successful customer acquisition
- strong customer loyalty (low churn)
- scalable business model
- sustainable growth
For start-ups and investors, MRR is a key performance indicator, as it reveals trends much more quickly than annual turnover and is particularly well suited to forecasting.
At the same time, MRR is closely linked to other key SaaS metrics such as Customer Acquisition Cost (CAC), Churn Rate and Lifetime Value (LTV), which together provide a comprehensive picture of the company’s health.
innoWerft helps start-up founders to measure and interpret MRR accurately and to use it as the basis for data-driven growth strategies.