---
title: "What Is MRR?"
term: "MRR"
description: "MRR (monthly recurring revenue) is the normalized monthly value of active subscription contracts—excluding one-time fees—so SaaS and subscription businesses can track recurring revenue growth and churn in comparable units."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/mrr
---

# What Is MRR?

> MRR (monthly recurring revenue) is the normalized monthly value of active subscription contracts—excluding one-time fees—so SaaS and subscription businesses can track recurring revenue growth and churn in comparable units.

**MRR** (monthly recurring revenue) measures the recurring subscription revenue a business earns in a given month, normalized so annual contracts and monthly plans compare on the same monthly basis.

### How it works

Core calculation:

MRR = Sum of (monthly subscription charges for all active customers)

For annual prepay: divide contract value by 12 for MRR contribution. A $12,000/year deal adds $1,000 MRR while active.

MRR bridges decompose changes month to month:

- **New MRR:** From new customers.
- **Expansion MRR:** Upsells, seat adds, price increases on existing accounts.
- **Contraction MRR:** Downgrades.
- **Churn MRR:** Lost customers.

**Net new MRR** = New + Expansion − Contraction − Churn. [Net revenue retention (NRR)](/glossary/net-revenue-retention-nrr) captures expansion minus churn on a cohort basis—often above 100% in strong enterprise SaaS.

**ARR** (annual recurring revenue) is typically MRR × 12—a shorthand for scale, not a separate counting method. [Monetization](/glossary/monetization) quality matters: exclude one-time implementation, usage overages (sometimes tracked separately), and non-recurring services unless your model defines them in MRR policy.

### Why it matters

- **Founders:** Report MRR consistently in [monthly reporting](/glossary/monthly-reporting). Define whether multi-year prepay counts as MRR or deferred revenue on the balance sheet (accounting differs from SaaS metrics).
- **Investors:** Value recurring businesses on MRR growth rate, gross margin on subscription revenue, and retention. Rule-of-thumb multiples vary by growth and NRR—always stage-specific.

### Common mistake

Booking full annual prepay as one month's MRR spike, or mixing GMV from marketplaces into MRR. Keep subscription recurring revenue separate from transactional volume.

### Related ideas

See also [net revenue retention (NRR)](/glossary/net-revenue-retention-nrr), [monetization](/glossary/monetization), [LTV:CAC](/glossary/ltv-cac), and [monthly reporting](/glossary/monthly-reporting).

## FAQ

### What is MRR in simple terms?

MRR adds up what customers pay you each month for subscriptions, expressed as a monthly run rate. If 100 customers pay $50/month, MRR is $5,000—before annual contracts are divided into monthly equivalents.

### Why does MRR matter?

Recurring revenue is predictable and valued higher than one-off sales. MRR growth, churn, and expansion drive fundraising narratives and benchmark comparisons across SaaS companies.


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Source: https://venturecapitaltracker.com/glossary/mrr