For SaaS businesses, Monthly Recurring Revenue (MRR) is more than just a number—it’s a core metric that fuels growth forecasts, boardroom conversations, and financial strategy. But calculating MRR accurately can get tricky fast, especially when pricing plans scale or customers churn.

In this post, we’ll break down how to calculate MRR properly, avoid common mistakes, and streamline everything with tools like TrueRev.

What Is MRR?

MRR stands for Monthly Recurring Revenue—the predictable income you generate from subscription-based services each month.

It’s used to:

• Forecast revenue growth
  
• Monitor financial momentum
  
• Analyze pricing model performance
  
• Report to stakeholders and investors
  

Unlike one-time charges or service fees, MRR includes recurring upgrades, downgrades, and contractions tied to subscriptions.

Why Accurate MRR Matters

Finance leaders, boards, and FP&A teams depend on MRR for:

• Setting revenue goals
  
• Calculating Net Revenue Retention (NRR), Lifetime Value (LTV), and ARR
  
• Informing pricing strategies and funding decisions
  

But if your MRR data is inaccurate, everything downstream—from NRR to revenue forecasts—can be thrown off.

Manual spreadsheets can’t always keep up with:

• Multi-year contracts with varied pricing
  
• Mid-month plan changes or proration
  
• Mixed billing cadences (monthly, quarterly, annually)
  

How to Calculate MRR

Basic Formula:

MRR = Number of Paying Customers × Average Revenue Per Account (ARPA)

But real-world SaaS operations often need a more detailed breakdown:

MRR Breakdown:

• New MRR – Revenue from new customers
  
• Expansion MRR – Upsells, add-ons, or plan upgrades from existing users
  
• Contraction MRR – Revenue lost due to downgrades
  
• Churned MRR – Revenue lost from cancellations
  
• Net New MRR = New + Expansion - Contraction - Churn
  
• Total MRR = Last Month’s MRR + Net New MRR
  

Common Mistakes to Watch For

Avoid these pitfalls that can distort your MRR reporting:

• Including one-time revenue like implementation or setup fees
  
• Not normalizing annual contracts to monthly values
  
• Overlooking proration from mid-cycle plan changes
  
• Using inconsistent data across billing platforms
  

Pricing Models Impact MRR Complexity

How you price your product can affect how you calculate and track MRR:

• Flat-rate pricing → Easy to measure
  
• Per-user pricing → Requires monthly seat tracking
  
• Usage-based or hybrid pricing → Needs logic to separate recurring from variable revenue
  

If you’re trying to manage all of this in Excel, it gets overwhelming quickly.

Automate MRR Tracking with TrueRev

At TrueRev, we simplify MRR calculations with automated, audit-ready tracking. Our system pulls directly from your billing platform (like QuickBooks) and maps contract terms to monthly revenue.

With TrueRev, you get:

• Instant MRR, ARR, and retention visibility
  
• Automatic support for complex billing and multi-year contracts
  
• CFO-ready dashboards—no spreadsheet headaches
  

Conclusion: Get MRR Right from the Start

MRR is the heartbeat of your SaaS business. Calculating it correctly ensures you’re scaling on solid ground—with metrics you can trust.

Looking to eliminate spreadsheet chaos and automate your MRR tracking? Let TrueRev handle the math so you can focus on strategy.

📚 Explore the full SaaS School article: https://www.truerev.com/saas-school/how-to-calculate-mrr