A metric used by companies with subscription-based business models to measure the total amount of predictable revenue they expect to receive every month. MRR is the sum of all monthly subscription revenues, factoring in monthly fees from all active customers. If customers are on different pricing plans, each customer’s monthly payment is summed up to get the total MRR.
MRR Formula
Here’s the basic equation:
Loading formula...Where:
- Monthly Subscription Fee per Customer: The amount of money charged to a customer for one month of service.
This equation can be more complex if you need to account for upgrades, downgrades, and churn.
Loading formula...Where:
- New Customers: Customers who have subscribed to the service within the month.
- Monthly Fee (for new customers): The recurring fee that new customers agree to pay for a month of service.
- Upgrades: Existing customers have moved to a higher-priced subscription plan within the month.
- Upgrade Fee Difference: The difference in the monthly fee resulting from an upgrade to a higher-priced plan.
- Downgrades: Existing customers have moved to a lower-priced subscription plan within the month.
- Downgrade Fee Difference: The difference in the monthly fee resulting from a downgrade to a lower-priced plan.
- Churned Customers: Customers who have canceled their subscriptions and no longer contribute to the monthly revenue.
- Monthly Fee (for churned customers): The recurring fee churned customers paid before they canceled their subscriptions.
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