MRR (Monthly Recurring Revenue)

Monthly Recurring Revenue (MRR) is the total predictable revenue a company earns each month from active subscriptions. It is the most granular view of a subscription business's health and is typically broken into components: New MRR (from new customers), Expansion MRR (upgrades from existing customers), Contraction MRR (downgrades), and Churned MRR (lost customers).

This decomposition is powerful because it reveals the dynamics driving growth or decline. A company might show flat total MRR while actually having strong new customer acquisition offset by high churn. Another might show modest new MRR but strong expansion revenue from existing customers, indicating excellent product-market fit and upsell potential.

MRR is calculated by normalizing all recurring revenue to a monthly figure. Annual contracts are divided by 12, quarterly by 3. Usage-based revenue is typically excluded from MRR unless it has a committed minimum. When pitching to investors, founders should be prepared to show MRR waterfall charts that break down the components of MRR change each month, as this gives investors a much clearer picture than a single growth number.