Video Length: 10:16
What is MRR?
MRR is an acronym for Monthly Recurring Revenue and is a measure of the predictable Gross Revenue based on active subscriptions. The primary purpose of the MRR measure is to permit comparative reporting across dissimilar subscriptions. The table below displays the challenge with maintaining a clear sense of subscription performance. MRR normalizes the subscription contract revenue so growth rates, churn rates and additional critical measures can be used to accurately access subscription business performance.
|Customer||Customer Subscription Status||Original Term (months)||New Term (months)||
Original Contract Value
New Contract Value
|1||Subscribes to 12-month term w/ $345 total contract value.||12||n/a||$345||n/a||Active|
|2||Subscribes to 24-month term w/ $599 total contract value.||24||n/a||$599||n/a||Active|
|3||Upgrades midterm, adding $50 contract value to what was previously a $250 contract.||12||12||$250||$300||Active|
|4||Downgrades midterm, reducing $30 contract value to what was previously an $80 contract.||3||3||$80||$50||Active|
|5||Subscribes to $200 6-month contract, but updates & extends the contract at the same time, establishing a new end date.||6||12||$200||$400||Active|
|6||Fails to renew a three-year contract w/ total contract value of $900.||36||0||$900||n/a||Canceled|
The MRR Dashboard can help answer questions like:
- Is recurring revenue increasing or decreasing each month?
- How much recurring revenue can I expect every month?
- Am I hitting monthly recurring revenue objectives?
How is MRR Calculated?
- The MRR calculation incorporates all recurring debits/charges and credits/refunds/chargebacks from active subscriptions.
- The following are not included in the MRR calculation:
- one-time charges (e.g., straight sale for $120)
- one-time credits
- usage-based billing amounts (e.g., $2 per GB usage)
Measures, Formulas & Definitions
|Acquisition Month||n/a||Organizing data by "Acquisition Date" allows the platform to associate Re-bill and Recurring transactions to the Initial transaction that initiated the order.|
|MRR||The amount of current (as of yesterday at midnight) scheduled recurring revenue.|
|New MRR||MRR contributed to an account in this month when the account contributed $0 last month AND has never contributed MRR in the past.|
|Expansion MRR||A positive change in an account's contribution to MRR when compared to the previous month. Common reasons for Expansion MRR include subscription upgrade, a coupon or credit being exhausted and causing the total subscription amount being paid to increase or an account adding a second subscription.|
|Contraction MRR||A negative change in an account's contribution to MRR when compared to the previous month. Common reasons for Contraction MRR include: subscription downgrade, a refund, coupon or credit being applied to bring the subscription amount paid down or an account removing one of their multiple subscriptions.|
|Churn MRR||MRR that was contributed by an account LAST month when the account had now contributed $0 this month. This reflects the amount of MRR that was lost. Because we will not know whether an account will contribute MRR or not until the END OF THE MONTH, Churned MRR will not show up until the current month is complete.|
|MRR per Customer||Gross Subscription Revenue ÷ Gross Subscription Orders||The average Monthly Recurring Revenue per customer.|
|CLTV||CLTV = Gross Profit ÷ Unique Initial Customers
Gross Profit = Gross Revenue - COGS
|The profit a business makes from any given customer (often referred to as LTV or CLV). The purpose of the CLTV measure is to assess the financial value of each customer.|