For SaaS and subscription-based businesses, MRR is one of the most important financial metrics for understanding your income’s stability and growth.
Whether you’re a business owner, manager or investor, knowing how to calculate and analyze MRR is essential for tracking performance, forecasting revenue and making data-driven decisions.
In this article, you’ll discover what MRR is, why it’s crucial for your business and how to calculate it. You’ll also learn actionable strategies to boost your MRR and unlock sustainable business growth.
What is MRR in sales?
What does MRR stand for? MRR is monthly recurring revenue, a key sales metric for subscription-based businesses looking to track income regularly.
What does MRR mean? MRR measures the consistent, predictable income a business earns per month. The meaning of MRR focuses solely on recurring revenue streams and excludes one-time payments like setup fees, onboarding costs or custom projects.
MRR is the backbone of any SaaS or subscription-based business model, giving you a clear snapshot of your business’s financial health. You can use MRR to analyze past performance, forecast future revenue and identify areas for improvement.
MRR differs from annual recurring revenue (ARR), a closely related SaaS metric showing revenue across the year suitable for yearly subscriptions. MRR is more granular and provides insights into how growth rate, churn rate and financial performance change over a shorter period.
Here’s how MRR, ARR and other similar key metrics compare:
Metric | Definition |
Monthly recurring revenue (MRR) | Monthly income from recurring revenue, ideal for short-term insights and trend analysis |
Annual recurring revenue (ARR) | Annualized value of recurring revenue, ideal long-term contracts and forecasting |
Average revenue per user (ARPU) | Tracks average revenue from customers over a given period of time (e.g., week, month, year, etc.) |
Annual contract value (ACV) | The average annual value of a customer’s contract |
Total revenue expected from a customer over their lifetime | |
Customer acquisition cost (CAC) | The average cost incurred to acquire a new customer, including marketing and sales expenses |
While the MRR meaning in business aligns closely with subscription models, its principles can apply to any activity with recurring income.
For example, professional services like consulting, marketing agencies and law firms often work on monthly retainers they can track as MRR.
Similarly, businesses like gyms, coworking spaces and real estate firms rely on monthly payments that mimic subscription revenue, making MRR tracking relevant.
How to calculate MRR
While calculating MRR is straightforward, you need accuracy to ensure the metric reflects your business’s actual performance. The following formula will enable you to calculate your MRR precisely.
MRR formula: MRR = total number of customers x average revenue per user (ARPU)
For example, if your business has 200 subscribers paying an average of $50 per month, your MRR is $10,000 (200 x 50).
If you have customers on annual plans, break down their payments into monthly equivalents (excluding any one-off charges) to include them in your MRR calculation.
Let’s say you bill a customer $1,200 annually. Divide this by 12 to get the monthly equivalent of $100, which you can add to your MRR. By including annual plans, your MRR reflects the true recurring income generated monthly.
How to calculate MRR using Pipedrive
Using the right software, such as Pipedrive, simplifies calculating your MRR.
Pipedrive’s customer relationship management (CRM) solution helps customer-facing teams manage leads, track sales activities and streamline the sales process. Among its many features, Pipedrive enables you to manage all your sales revenue (whether it’s one-off deals or ongoing monthly subscriptions) along with customizable sales dashboards and advanced reports to track your total MRR.
Here are three easy steps for monitoring MRR with Pipedrive’s functionality.
1. Set up your revenue tracking
The first step is to track every deal that goes through your sales pipeline accurately. Set up the recurring products feature (available on Advanced plans and higher) in your Pipedrive account to record how often you bill a particular product or service.
Users on all plans can create custom fields to track revenue associated with each deal. Simply set up a custom field labeled “monthly revenue” to capture recurring income for each deal. For better reporting, you can also use additional custom fields to categorize deals as new customers, expansion deals or reactivations.
Remember to calculate the monthly equivalent for customers on annual plans and record this value in the field.
Note: You can create proposals and quotes with recurring products with the Smart Docs add-on. Include the recurring product fields in your template, and the finished document will automatically add the relevant information to each deal.
2. Generate revenue reports
After recording all the deal information, you need to set up reports to track the MRR. If you used the recurring products feature, you can now see the MRR (along with other important metrics) per deal.
To get an overview of your MRR and other metrics, set up a product report using Pipedrive's Insights feature. The different filters let you segment data to show all your product fields.
3. Monitor how MRR changes over time
Once you’ve created the report, add it to your sales dashboard and share it with your team.
Visualizing your MRR and seeing how it relates to your other sales KPIs makes it easier to spot trends and take appropriate action.
For example, you can track MRR changes depending on your sales activities by individual salespeople and overall team performance. You can also see whether your MRR matches your previously forecast revenue, so you can double down on your current strategy or pivot to a different approach.
By using Pipedrive to calculate and track MRR accurately, you gain greater insight into your business’s revenue streams and can make smarter decisions to drive profitability.
Why is MRR important?
Whether you’re a manager trying to measure sales performance or an investor evaluating potential acquisitions, MRR plays a vital role in understanding company growth. Here are four main reasons to keep monitoring MRR.
1. Tracks financial performance for data-driven decision-making
MRR gives you a clear view of how much predictable revenue your business generates in a given month. A consistent MRR is an excellent indicator of your company’s overall financial health.
By breaking MRR into its different types (which we’ll look at in the next section), you can track exactly what’s driving your revenue growth or holding it back.
For example, a sudden spike in churn MRR might point to customer dissatisfaction, while a strong expansion MRR suggests your upselling strategies are working.
Without a reliable way to track monthly revenue, it’s harder to identify trends or measure progress. MRR simplifies the process, offering clarity and actionable insights.
2. Simplifies forecasting for improved planning
Because it focuses on recurring revenue, MRR makes it easier to estimate cash flow and plan for business growth.
Imagine your MRR has grown steadily by 10% each month. You can project how much revenue you’ll have in six months so you can make decisions like hiring new team members or launching a major marketing campaign with confidence.
MRR also smooths out the unpredictability of one-time payments, giving you a more accurate foundation for planning. Whether you’re scaling your business globally or navigating leaner times, MRR keeps you focused on what’s coming next.
3. Attracts investors by demonstrating predictable growth
For investors, MRR is a sign of stability and growth. A healthy MRR growth rate shows your business is generating consistent, predictable income, which is what investors look for when evaluating potential acquisitions.
Strong MRR also indicates a scalable business model. Investors want to see that your revenue isn’t reliant on one-time deals but instead comes from customers who will stick around month after month. Highlighting your MRR (especially components like expansion MRR) can make your business a much more attractive investment.
If you’re planning to raise funds or sell your business, tracking and improving MRR is one of the best ways to impress potential backers.
4. Aligns teams around key goals for improved collaboration
MRR serves as a unifying metric for SaaS companies that connects your teams.
For example:
Marketing teams can drive campaigns to boost reactivation MRR or promote add-ons
Sales teams can focus on acquiring new customers and increasing new MRR
Customer success teams can work to reduce churn MRR and improve customer retention
When everyone understands how their efforts contribute to MRR growth, it fosters collaboration and keeps your team motivated.
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The 5 different types of MRR
Understanding the different types of MRR is essential for accurately tracking your business’s recurring revenue. Each MRR type provides unique insights into the performance of your revenue streams and helps identify areas for improvement.
Type of MRR | Description |
1. New MRR |
Example: using the MRR formula, if 20 new customers sign up for your $30/month plan, your new MRR is $600. |
2. Expansion MRR |
Example: if 10 current customers upgrade to a higher-priced plan, adding $20 each to their subscription, your expansion MRR is $200. |
3. Contraction MRR |
Example: if five customers downgrade their plans by $15 each, your contraction MRR is $75. |
4. Churn MRR |
Example: if three customers who were paying $50/month cancel their subscriptions, your churn MRR is $150. |
5. Reactivation MRR |
Example: if four returning customers subscribe to a $40/month plan, your reactivation MRR is $160. |
Net new MRR
You can combine all the above types of MRR into a single measurement to track how your MRR changes each month. Use the formula below to calculate it.
Net new MRR = New, expansion and reactivation MRR (revenue from new, upgraded and returning customers) − churn and contraction MRR (lost revenue due to subscription cancellations or downgraded plans)
For example, say you have:
New MRR from 10 new customers at $50/month at $500
Expansion MRR from upselling existing customers at $300
Reactivation MRR from returning customers at $150
Churn MRR from canceled subscriptions at $200
Contraction MRR from downgraded plans at $100
Your net new MRR is (500+300+150) − (200+100) = $650, meaning your total MRR has grown by $650 that month.
Tracking these types of MRR individually helps you make more informed decisions about specific areas needing attention. Net new MRR gives you an overall picture of your revenue health.
What is a good MRR rate?
MRR rates can vary significantly depending on your company’s size and the market. A brand-new SaaS platform in a niche industry will have a lower MRR than an established company serving a wider range of customers.
Still, specific benchmarks can help you assess your business’s performance. In particular, pay attention to how your MRR changes over time (i.e., the net new MRR) rather than the MRR itself.
In its 2023 SaaS Benchmarks report, OpenView shared benchmarks for how ARR growth (and therefore MRR growth) varies depending on a business’s annual recurring revenue:
Annual recurring revenue | Median year-on-year growth rate |
<$1m | 90% |
$1-5m | 58% |
$5-20m | 35% |
$20-50m | 24% |
>$50m | 25% |
The data shows that MRR growth rates vary by company size, with smaller companies enjoying a much higher growth rate.
However, these figures can fluctuate from year to year. The same report shows that the 2023 median growth rates for all companies of all sizes were lower than the 2022 figures.
For example, while companies with $5–20m ARR grew revenue by a median of 61% in 2022, this dropped to 35% in 2023.
5 strategies to boost MRR
We’ve looked at what MRR is and how to calculate it, but what if your MRR isn’t as high as you’d like it to be? Growing your MRR is a top priority for any SaaS business, and these actionable strategies will help you do just that.
1. Increase revenue streams
If you’re looking to grow MRR, one of the first places to start is by looking at your existing revenue streams. Think about how you can generate more income from your current customers.
Are you able to upsell customers to your next product or service tier? If you have a basic plan, you could create an advanced tier with sought-after premium features. Customers who see the additional value are more likely to pay more willingly.
For example, when Google users get close to using up their free 15GB storage for Drive and Gmail, they get a prompt to sign up for a Google One plan. The prompt explains why additional storage is essential and offers a discount as an incentive.
Google One now has over 100 million subscribers. The company’s whole subscription business generates $5 billion in annual revenue – up fivefold from its 2019 revenue.
Another option is cross-selling. Add-ons are a great way to offer related products or services that complement what the customer already uses. For instance, if you run a project management tool, you might offer an advanced time-tracking feature as a paid add-on.
Bundling products can also work. Packaging multiple features or services at a discounted rate encourages your customers to increase their monthly spending.
2. Optimize your pricing plans
Pricing significantly impacts MRR, so it’s worth reviewing your pricing strategy regularly. Have you aligned your current plans with the value your product provides? If not, it might be time to make some adjustments.
Look at how you structure your pricing tiers. Clear distinctions between plans help customers see the value of upgrading.
You could also experiment with value-based selling, which ties the cost of your product to the value it delivers. Customers are more likely to pay a higher price if a feature promises exceptional results.
If you run a freemium model, focus on converting free users into paying customers. Limited-time discounts and exclusive features for paid tiers effectively encourage upgrades.
Alternatively, consider removing your free plan. Free tiers can help attract new users, but the resources required to support them might outweigh the benefits.
For example, when Snooz.io removed its free plan, its revenue growth rate doubled and the amount of work required to maintain the app fell.
Evaluate your specific audience and goals and ensure your pricing model reflects them effectively.
3. Improve customer retention
While acquiring new customers is fundamental to any business, keeping the ones you already have is just as crucial. Retention is a primary driver of MRR, and minor improvements here can have a big impact.
Start by identifying why customers churn. Is it due to pricing, product fit or poor customer experience? Once you know the problem, you can take steps to address it.
For instance, if customers leave because they don’t understand how to use your product, focus on improving your onboarding and customer support.
Building stronger relationships and finding ways to delight your customers is another way to boost retention.
For example, B2B podcasting agency Sweet Fish Media had lost 15% of its MRR. By introducing an account review process and helping clients find fresh opportunities, it reduced revenue churn to 3%.
Personalized communication, good customer service and a strong community are all effective ways of reinforcing customer loyalty, leading to repeat purchases and a higher customer lifetime value.
4. Reactivate dormant customers
Sometimes, customers leave despite your best efforts, but that doesn’t mean they’re gone for good. Reactivating dormant customers can be a quick win for increasing your MRR.
To get started:
Reach out to churned customers with personalized offers and sales promotions
Highlight any new features or updates they might have missed
Consider offering a time-sensitive discount to encourage them to return
For example, if a customer canceled six months ago because they felt your product was missing a key feature, let them know it’s now available. Pair that update with a reactivation offer, like a 20% discount for the first three months of their renewed subscription.
Staying in touch with former customers and showing them how your product has evolved increases your chances of winning them back.
5. Use automation
Workflow automation can be a game-changer when it comes to boosting MRR. Automating repetitive tasks like subscription plan renewals and outreach sales campaigns frees your team to focus on high-value, high-touch activities.
You could set up automated email sequences in Pipedrive to reach customers nearing their renewal dates with incentives for upgrading to a higher tier. Similarly, by identifying customers who might be at risk of churning, you can automate personalized outreach to re-engage them.
To fully benefit from automation, keep all your tools connected with software integrations. Pipedrive users get access to Marketplace, which enables you to connect your CRM with your billing software, analytics platforms and other tools for more accurate data.
As a result, you get a complete picture of your MRR and can set up useful automations that leverage your connected data.
Final thoughts
Understanding and regularly tracking your MRR gives you invaluable insights into your business’s financial health, helping you identify growth opportunities and address potential challenges.
Your next step is to apply what you’ve learned. Start by consistently calculating your MRR, breaking it down into its components and using tools like Pipedrive to monitor trends over time. Analyze the data to uncover patterns and refine your strategies to get the most value out of your customer relationships.
By maintaining a clear focus on tracking and improving your MRR, you’ll build a stronger, more sustainable business and position yourself for long-term growth.
