MRR

In depth

MRR is the single most important metric for a SaaS business because it measures the recurring value the product creates. It strips out one-time fees, discounts that don't repeat, and annual bumps, giving you a clean signal of how fast the business is actually growing.

MRR is tracked across five components: New MRR (from new customers), Expansion MRR (upgrades, add-ons), Reactivation MRR (returning churned customers), Contraction MRR (downgrades), and Churn MRR (cancellations). Net New MRR = New + Expansion + Reactivation − Contraction − Churn.

Investors look at MRR growth rate and the composition: a company growing MRR by 20% a month on Expansion is healthier than one growing 20% purely on New, because it shows existing customers getting more value.

Formula & example

Rules of thumb

• Normalise annual plans to monthly before adding to MRR (annual price ÷ 12).
• Never include one-time setup fees, professional services, or usage overages.
• Track Net New MRR weekly — it's your true growth signal.
• Good early-stage T2D3 benchmark: triple ARR Y1–Y2, double Y3–Y5.

Common mistakes

• Counting discounted first-month promos as full MRR.
• Forgetting to remove MRR the day a customer cancels, not at end of billing cycle.
• Mixing MRR with billings (what customers paid this month) — they diverge for annual plans.

Put it into practice

FAQ

Related terms

Sources

• Stripe MRR guide