What it is
MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) measure the predictable subscription income a company earns. MRR and ARR are core SaaS metrics.
Facts
- ARR = MRR x 12.
- Only recurring revenue counts. Setup fees and professional services are excluded.
- Net New MRR = New + Expansion minus Churned minus Contraction MRR.
- Net Revenue Retention (NRR) above 100% means existing customers increase their spending faster than revenue is lost through churn.
Who it's for
Subscription and SaaS founders tracking growth and pitching investors.
How it helps you
Recurring revenue makes income predictable, so you can forecast runway, plan hiring, and demonstrate durable growth to investors.
Caveats
Don't inflate MRR by including one time fees or annual prepayments as if monthly. Normalize annual contracts to a monthly figure to keep MRR honest.
Conclusion
MRR and ARR are core metrics for a subscription business. Keep them limited to genuinely recurring revenue, and watch net retention as a key sign of health.
