Monthly Recurring Revenue (MRR) is a key metric used by businesses, especially those with subscription-based models such as Software as a Service (SaaS), to measure the predictable and recurring revenue generated from subscriptions within a given month. MRR represents the total revenue that a company expects to receive on a monthly basis from its subscription customers.

MRR is calculated by summing up the revenue generated from all active subscriptions during a specific month, excluding one-time fees, one-off purchases, or any other non-recurring revenue. It provides insight into the stability and growth of a company’s subscription business over time.

MRR can be further broken down into different components, such as New MRR (revenue generated from new subscriptions acquired during the month), Expansion MRR (revenue generated from existing customers who upgrade their subscriptions or purchase additional services), Contraction MRR (revenue lost due to downgrades or cancellations by existing customers), and Churn MRR (revenue lost due to cancellations by customers).

Tracking MRR allows businesses to monitor the health of their subscription business, identify trends, and make informed decisions to optimize customer acquisition, retention, and revenue growth strategies. It is a critical metric for investors, stakeholders, and management to assess the performance and scalability of subscription-based businesses.