What is Monthly Recurring Revenue (MRR)?

MRR captures the monthly value of all active, recurring contracts — including new deals, expansions, and downgrades — standardized to a monthly rate. It’s how SaaS companies track the health and direction of their subscription revenue model.

Basic Formula:

MRR = Σ (Monthly contract value of all active customers)

In practice, it’s a combination of:

• New MRR – revenue from newly closed customers
• Expansion MRR – increases in spend from existing customers
• Contraction MRR – downgrades or seat reductions
• Churned MRR – lost recurring revenue from cancellations

What’s not included:

• One-time fees
• Professional services revenue
• Usage overages (unless billed as recurring)

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Why It Matters in B2B SaaS

• It keeps the entire sales team aligned on business impact. MRR tells you not just how many deals you’re closing, but what those deals are actually worth in recurring terms.
• It’s the pulse of revenue momentum. MRR growth reflects whether your efforts are driving the company forward — through new business, upsells, or renewals.
• It creates clarity across functions. RevOps uses it to forecast; Sales Managers use it to track team performance; SDRs use it to understand account potential.
• It helps reps set smarter goals. MRR-based targets are more aligned with company objectives than just logo count or pipeline volume.

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How to Measure MRR

1. List all paying customers with active subscriptions
2. Convert all billing terms to a monthly value (e.g., divide annual contracts by 12)
3. Exclude one-time charges and services revenue
4. Use current contracted values, including any upgrades or downgrades

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Best Practices

• Segment MRR by source: New, Expansion, Contraction, Churned
• Use MRR to track rep contribution and territory performance
• Automate tracking via CRM or billing platforms to avoid gaps
• Review MRR movements monthly to spot trends or deal quality issues