Monthly Recurring Revenue (MRR) is one of the most important metrics for any SaaS business. It captures your predictable, recurring revenue each month—critical for forecasting, tracking growth, and reporting to stakeholders. Whether you’re a finance leader or SaaS founder, understanding MRR helps you keep a finger on the pulse of your business.

What Is Monthly Recurring Revenue (MRR)?

MRR is the total predictable revenue your SaaS business earns from active subscriptions in a given month. Unlike one-time payments, it focuses only on recurring revenue.

💡 Example: 10 customers paying $1,000/month = $10,000 MRR

Why MRR Matters in SaaS Finance

MRR gives finance teams a consistent, reliable metric to:

• Forecast revenue and cash flow
  
• Report to investors and the board
  
• Benchmark performance
  
• Analyze churn and growth trends
  

It’s especially useful for startups looking to scale predictably or present clean financials to stakeholders.

How to Calculate MRR

Basic MRR Formula:

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

💡 Example: 50 customers × $200/month = $10,000 MRR

SaaS companies often need deeper insights—especially with multiple pricing tiers, annual contracts, and upgrades.

MRR Components:

• New MRR → From new customers
  
• Expansion MRR → From upgrades/add-ons
  
• Contraction MRR → From downgrades
  
• Churned MRR → From cancellations
  

What About Annual Contracts?

To normalize annual plans into MRR, divide the annual contract value by 12.

💡 Example: $12,000/year = $1,000 MRR

Tools like TrueRev automate this, translating all contract types into monthly recurring figures.

Common MRR Mistakes to Avoid

Avoid these common errors:

• Including one-time or variable revenue
  
• Ignoring downgrades and churn
  
• Using booked revenue instead of recognized revenue
  
• Skipping adjustments for discounts
  

TrueRev helps finance teams avoid these mistakes by integrating directly with billing systems and automating clean, audit-ready calculations.

MRR vs. ARR: What’s the Difference?

MRR is monthly; ARR (Annual Recurring Revenue) is yearly:

ARR = MRR × 12

• MRR helps with short-term performance tracking
  
• ARR is useful for long-term planning and valuation
  

How TrueRev Streamlines MRR Tracking

Manual MRR tracking can lead to delays and errors. TrueRev offers:

• Automated MRR calculations and contract normalization
  
• Visual MRR waterfalls and trend reports
  
• Insight into churn, expansion, and net growth
  

Conclusion

MRR is more than a number—it’s the heartbeat of any SaaS business. Tracking it accurately helps you grow sustainably, present with confidence, and make smarter decisions. With TrueRev, finance teams get clean, real-time MRR insights—without the spreadsheets.

📚 Want to dive deeper? Read the full SaaS School article on MRR here.

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