What is Monthly Recurring Revenue (MRR)?
The Short Answer
Monthly Recurring Revenue (MRR) explained simply
Monthly Recurring Revenue (MRR) is the total predictable revenue a business expects to receive every month from its active subscriptions or recurring services. It includes all recurring income from subscriptions, add-ons, and upgrades, but excludes one-time fees. MRR helps businesses track their financial performance and forecast future revenue.
Real-World Example
Calculating MRR for a SaaS Company
Imagine a SaaS company with 100 customers paying $50/month for a basic plan and 20 customers paying $150/month for a premium plan. They also have 10 customers who upgraded their basic plan with a $20/month add-on.\n\n Basic Plan Revenue: 100 customers * $50/month = $5,000\n Premium Plan Revenue: 20 customers $150/month = $3,000\n Add-on Revenue: 10 customers * $20/month = $200\n\nTotal MRR: $5,000 + $3,000 + $200 = $8,200
Why this matters
MRR is crucial for subscription businesses because it provides a clear picture of financial stability and growth. It helps in forecasting revenue, making informed business decisions, and attracting investors. A consistent and growing MRR indicates a healthy business model.
Always track your MRR closely. It's a direct indicator of your business health and helps you predict future income. Focus on strategies that increase recurring revenue, like customer retention and upselling.
Always track your MRR closely. It's a direct indicator of your business health and helps you predict future income. Focus on strategies that increase recurring revenue, like customer retention and upselling.
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