What is MRR and how to calculate it correctly
Monthly Recurring Revenue (MRR) guide: calculate, track, and improve this essential metric for SaaS businesses and recurring revenue models.
What is MRR and how to calculate it correctly
Quick answers
What is MRR? MRR (Monthly Recurring Revenue) is the predictable, recurring revenue a SaaS business generates from active subscriptions in a given month, normalized to a monthly figure. An annual subscription worth $1,200 contributes $100/month to MRR — not $1,200 in month one. It's the number you actually run the business on.
What is the formula for MRR? MRR = Sum of the monthly subscription value for all active subscribers. For annual plans: MRR = Annual contract value / 12. Never add one-time fees, professional services, or unpaid trials to MRR.
What is the difference between MRR and ARR? ARR (Annual Recurring Revenue) = MRR × 12. It's a projection, not a separate calculation. Use MRR for operational decisions and monthly tracking. Use ARR for investor reporting and enterprise contract sizing. Never calculate MRR by dividing ARR by 12 — calculate MRR from actual subscription data, then multiply.
What are the components of MRR I should track separately? New MRR (new customers), Expansion MRR (upgrades and upsells from existing customers), Contraction MRR (downgrades), Churned MRR (cancellations), and Reactivation MRR (returning churned customers). Net New MRR = New + Expansion − Contraction − Churned. The shape of these components tells you more about business health than total MRR alone.
What is negative net MRR churn? When Expansion MRR exceeds Churned + Contraction MRR, net MRR churn is negative — existing customers are worth more over time, not less. This is the goal for growing SaaS businesses because it means you can grow revenue even without adding new customers.
What are the most common MRR calculation mistakes? Including one-time revenue (setup fees, professional services), recognizing annual contracts upfront instead of dividing by 12, and counting free trials as MRR before the first payment. All three inflate your MRR and distort growth metrics.
How do I track MRR in Metabase? Use Metabase's SQL editor to build MRR by month with components broken out as separate columns, then visualize as a stacked bar chart. The B2B SaaS product metrics guide has the SQL patterns. Define MRR and each component in Data Studio so every team reports the same number. Use time series analysis to spot seasonal patterns and inflections.
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MRR — Monthly Recurring Revenue — is the revenue number SaaS companies actually run on. Not total revenue, not cash collected, not ARR divided by twelve. MRR specifically.
Here's what it is, why the distinctions matter, and how to calculate it from your subscription data.
The definition
MRR: The predictable, recurring revenue your business generates from active subscriptions in a given month, normalized to a monthly figure.
The key word is normalized. An annual subscription worth $1,200 contributes $100/month to MRR — not $1,200 in month one and zero for the next eleven.
MRR = Sum of (monthly subscription value for all active subscribers)
For annual plans: MRR = Annual contract value / 12
The MRR components
Tracking total MRR is useful. Tracking its components is where the insight lives:
| Component | What it is |
|---|---|
| New MRR | Revenue from brand new customers |
| Expansion MRR | Revenue from existing customers upgrading or buying more |
| Contraction MRR | Revenue lost from existing customers downgrading |
| Churned MRR | Revenue lost from cancellations |
| Reactivation MRR | Revenue from previously churned customers returning |
When Expansion MRR exceeds Churned + Contraction MRR, you have negative net revenue churn — existing customers are worth more over time, not less.
The Metabase blog guide on B2B SaaS product metrics walks through MRR calculation in detail, including how to model expansion and churn MRR from a subscriptions table.
MRR vs ARR
ARR (Annual Recurring Revenue) = MRR × 12. It's a projection, not a separate calculation. Use MRR for operational decisions (monthly tracking, growth rate, churn). Use ARR for investor reporting and valuing the business — it's the number that maps more cleanly to enterprise contract sizes.
Don't divide your ARR by twelve and call it MRR. Calculate MRR from actual subscription data, then multiply for ARR.
Common mistakes
Including one-time revenue. Professional services, setup fees, one-time purchases — these don't belong in MRR. They're not recurring.
Recognizing annual contracts upfront. A $12,000 annual deal signed in January is $1,000/month of MRR, not $12,000 in January.
Not normalizing trial periods. Free trials aren't MRR. The clock starts at first payment.
Putting it in Metabase
Trend your MRR components as a stacked bar chart — New MRR, Expansion MRR, and the negative bars for Contraction and Churn. The shape of that chart tells you more about business health than the total MRR line alone.
Use time series analysis in Metabase to spot seasonal patterns and concerning inflections. Define MRR and its components in Data Studio — including which events count as expansion vs. contraction — so the whole company is reporting the same number.
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Key takeaways
- MRR = normalized recurring revenue from active subscriptions; annual plans contribute MRR/12 each month