If you run a SaaS business and you're not tracking MRR, you're flying blind.
Monthly Recurring Revenue is the single number that tells you whether your business is growing, stalling, or dying. It strips away one-time payments, refunds, and noise to give you the clearest picture of your subscription revenue.
How to Calculate MRR
The basic formula is simple:
MRR = Number of active subscribers x Average revenue per subscriber
But in practice, you need to account for several components:
- New MRR — Revenue from customers who subscribed this month
- Expansion MRR — Existing customers who upgraded
- Contraction MRR — Existing customers who downgraded
- Churned MRR — Revenue lost from cancellations
Your net new MRR is: New + Expansion - Contraction - Churned.
Why MRR Matters More Than Total Revenue
Total revenue can be misleading. If you sell a $500 lifetime deal, your revenue spikes — but your recurring revenue didn't change at all. Next month, that spike disappears and you're back to baseline.
MRR tells you what you can count on every month. It's what investors look at, what determines your valuation, and what tells you if you have a real business or a series of one-time sales.
Common MRR Mistakes
1. Including one-time payments. Setup fees, consulting hours, and lifetime deals are not MRR. Keep them separate.
2. Not tracking MRR movements. Knowing your total MRR is good. Knowing how much came from new customers vs. expansion vs. churn is 10x more useful. A MRR waterfall chart breaks this down visually.
3. Ignoring contraction. If 5 customers downgraded from your $99 plan to your $29 plan, that's $350/mo in contraction MRR. It doesn't show up in your churn numbers but it's eating your growth.
4. Annual subscriptions. If someone pays $588/year, their MRR contribution is $49/month — not $588 in the month they paid.
What Good MRR Growth Looks Like
For early-stage SaaS (under $10K MRR), 15-20% month-over-month growth is strong. As you scale, that rate naturally slows — 5-10% monthly growth at $50K+ MRR is excellent.
The number that matters most isn't your growth rate in isolation — it's your growth rate relative to your churn. If you're growing 10% but churning 8%, your real growth is only 2%.
Track It Automatically
You can calculate MRR in a spreadsheet, but it gets tedious fast. RevPane connects to Stripe and automatically tracks your MRR, MRR movements, and growth rate — so you can focus on building your product instead of maintaining spreadsheets.
Try RevPane free — connect Stripe in minutes.
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