Monthly Recurring Revenue (MRR)

MRR is commonly used by subscription businesses with monthly plans, such as software, streaming and membership services. It is calculated by adding up the monthly subscription fees of all active customers, with annual contracts converted into a monthly amount.

For example, a business with 1,000 customers paying 100 a month, 500 paying 50 a month and 50 annual customers paying 1,200 a year has MRR of 100,000 plus 25,000 plus 5,000, giving 130,000.

Businesses track how MRR changes each month by breaking it into new MRR from new customers, expansion MRR from upgrades, contraction MRR from downgrades and churned MRR from cancellations.

MRR provides an up-to-date, detailed view of momentum, while annual recurring revenue gives a longer-term view and is roughly MRR multiplied by twelve. Like ARR, MRR is not an accounting measure, so definitions vary between companies.