What Is MRR?
MRR, or monthly recurring revenue, is the predictable revenue a business expects to earn each month from subscriptions or ongoing contracts.
How it works
MRR adds up the monthly value of all active recurring plans. An annual plan is divided by 12. One-time fees, such as setup or consulting, are normally excluded, because they do not repeat. Founders track MRR in parts: new MRR from new customers, expansion MRR from upgrades, and lost MRR from cancellations and downgrades.
The movement in words: ending MRR equals starting MRR plus new plus expansion minus lost.
Example
For example, a company starts the month with $20,000 in MRR. It signs new customers worth $3,000, existing customers upgrade for another $1,000, and cancellations remove $1,500. Ending MRR is $20,000 plus $3,000 plus $1,000 minus $1,500, or $22,500. Net growth for the month is 12.5 percent.
Why founders care
MRR is the clearest pulse of a subscription business. It shows growth, whether customers stay, and how predictable revenue is, which helps with planning and fundraising. Pair it with churn and gross margin, since MRR alone does not show whether the business makes money.
Common mistakes
- Including one-time fees or unpaid, free-trial accounts.
- Counting a full annual prepayment in a single month.
- Mixing up MRR with cash collected, which can differ in timing.
Frequently asked questions
What is the difference between MRR and revenue?
Revenue is everything you earn in a period, including one-time sales. MRR counts only recurring subscription value, normalized to a month, so it is a forward-looking measure of predictable income.
How is MRR different from ARR?
ARR is MRR multiplied by 12. It expresses the same recurring revenue on an annual basis, often used for larger or annual-contract businesses.
Related terms
Go deeper
- Startup Metrics That Matter: MRR, Churn, CAC and LTV GuideStartup metrics explained in plain English: MRR, ARR, churn, CAC, LTV and more, with formulas in words, worked examples, and what investors ask for.
- How to Find Product Market Fit: Signs and Tests GuideHow to find product market fit and know when you have it: signs to watch, a simple survey, how long it takes, and what to do if the signs are not there yet.
All 70 startup terms · More terms starting with M · Guides
General information, not legal, tax or financial advice. Reviewed 11 November 2026.