MRR

Full Definition

MRR is ARR divided by 12—the monthly expression of predictable, recurring subscription revenue. While ARR is the strategic valuation metric, MRR is the operational cadence metric that CEOs and revenue leaders monitor weekly and monthly to track momentum. MRR is decomposed into its constituent flows each month: New MRR from newly acquired customers, Expansion MRR from upsells and seat additions, Contraction MRR from downgrades, and Churned MRR from cancellations. The net of these four flows equals the month-over-month change in total MRR. The MRR waterfall analysis is one of the most powerful diagnostic tools in a subscription business. New MRR growth combined with low churn and strong expansion indicates a healthy flywheel; high new MRR paired with proportionally high churn signals a leaky bucket requiring immediate attention to onboarding and customer success. Most B2B SaaS companies target monthly logo churn below 1–2% and monthly revenue churn below 0.5–1%, with expansion revenue ideally offsetting churn entirely—the condition known as negative net revenue churn. MRR is also used internally for sales compensation, quota-setting, and financial forecasting. Sales teams earn commissions on new and expansion MRR bookings. Finance teams use beginning MRR plus expected net flows to build monthly revenue forecasts without relying solely on quota attainment assumptions. Investors request MRR cohort analyses—breaking MRR by the month a customer first subscribed—to assess retention curves and model long-term revenue durability with historical evidence rather than theoretical assumptions.

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