SAAS ANSWERS

What is MRR?

The simple answer is that MRR is your Monthly Recurring Revenue and one of the key metrics that SaaS companies use to evaluate success. 

BUT LET’S GO DEEPER

MRR is a way to normalize varying packages and terms.

MRR also directly correlates to dollars versus other metrics like users, accounts, or other ambiguous indicators.

Why does revenue need “normalized”?

You probably have multiple package levels or even custom packages.

Accounts may renew annually and monthly.

Accounts may renew on different dates or be prorated.

Accounts are lost – churn; and accounts are won – sales.

You may have upgrades and downgrades at different times.

MRR is frequently used in a number of critical subscription performance reports: Momentum, Customer Lifetime Value (uses MRR in the CLV computations) and MRR Cohort.

SAAS MRR

Some MRR formula examples.

NET MRR

40,100 +

Existing MRR

2,400 +

New MRR

7,900 –

Expansion MRR

1,200 =

Churn MRR

49,200

Net MRR

GROSS MRR CHURN RATE

1,200  / 

Churn MRR

40,100 =

Total MRR At Start Of Month

3% ( .029 )

Gross MRR Churn

GROSS MRR GAIN

(2,400 +

New MRR

7,900 –

Expansion MRR

1,200 )  /

Churn MRR

40,100 =

Existing MRR

25%

Gross MRR Gain

OK, NOW WHAT

Your goal is to reduce volatility of these numbers and ensure their trajectory.

MRR Volatility ( big gains and losses month to month )
can indicate unpredictable marketing, incorrect package terms, high churn and other underlying issues.

Gross MRR Churn Rate should be consistently going down.
Otherwise you need to look at retention strategies.

Gross MRR Gain Rate should be consistently going up.
Otherwise you need to look at marketing strategies and conversion.

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