MRR (Monthly Recurring Revenue)
Median SMB SaaS grows MRR 8-12% month-over-month in early stages. Growth below 5% signals product-market fit issues (OpenView 2024).
💡TL;DR
MRR = monthly revenue from subscriptions. Formula: sum of all active subscriptions normalized to monthly value. For annual contracts, divide by 12. Track New MRR (new customers), Expansion MRR (upgrades), Churned MRR (cancellations), and Net New MRR (new + expansion - churn). Healthy SMB SaaS targets 8-12% MoM growth. MRR is the foundation for ARR, runway calculations, and investor reporting.
Definition
The predictable revenue a SaaS company expects to receive every month from active subscriptions. MRR = Sum of (customers × monthly subscription price). It normalizes annual and monthly contracts into a single metric for tracking growth velocity.
🏢What This Means for SMB Teams
For SMBs, MRR under $100k means every customer matters. Track at customer level, not just aggregate. Sudden drops signal churn before it shows in logos.
Track MRR, churn, CAC payback—AI acts when metrics slip.
Metrics that matter, actions that move them.
📋Practical Example
A 25-person B2B SaaS ($380k MRR) discovered their "growth" was misleading. New MRR was $45k/month but Churned MRR was $38k, leaving only $7k net. They implemented a churn early warning system tracking usage drops. After 90 days, Churned MRR fell to $22k while New MRR held, tripling net growth to $23k/month and adding $276k ARR annually.
🔧Implementation Steps
- 1
Normalize all contracts to monthly value (annual ÷ 12, quarterly ÷ 3).
- 2
Categorize MRR into New, Expansion, Contraction, and Churned buckets.
- 3
Calculate Net New MRR = New + Expansion - Contraction - Churned.
- 4
Set up automated alerts for MRR drops >5% from any single customer.
- 5
Report MRR weekly to leadership with trend lines and cohort breakdown.
❓Frequently Asked Questions
Should I include one-time fees in MRR?
No. MRR is strictly recurring revenue. One-time fees (setup, implementation, training) should be tracked separately. Including them inflates MRR and misleads growth projections.
How do I handle usage-based pricing in MRR?
Use committed MRR (minimum contract value) as base, then track usage overage separately. Some report "contracted MRR" and "actual MRR" side by side for accuracy.
⚡How Optifai Uses This
Optifai integrates billing data to calculate MRR automatically, breaking down by customer segment and tracking expansion/contraction signals. Revenue Ledger shows MRR trends alongside pipeline health.
📚References
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Related Terms
ARR (Annual Recurring Revenue)
The annualized value of recurring subscription revenue. ARR = MRR × 12. It represents the yearly run-rate assuming no growth or churn, used for valuation, planning, and investor communication.
NRR (Net Revenue Retention)
The percentage of recurring revenue retained from existing customers after accounting for expansion, contraction, and churn. NRR = (Starting MRR + Expansion - Contraction - Churn) ÷ Starting MRR × 100. NRR >100% means you grow even without new customers.
Expansion Revenue
Additional recurring revenue from existing customers through upsells (higher tier), cross-sells (additional products), or seat expansion. Expansion Revenue = Ending MRR from Existing Customers - Starting MRR from Same Customers (excluding churn).
Churn Risk Signals
Behavioral indicators that predict customer churn before it happens. Common signals include: declining login frequency, reduced feature usage, support ticket spikes, NPS score drops, billing page visits, and engagement with competitor content. Early detection enables proactive intervention.