Monthly Recurring Revenue (MRR) is a metric used primarily by companies with subscription-based business models to predictably measure their revenue on a monthly basis. MRR is the sum of all subscription fees that a company expects to receive each month.
For example, if a company has 100 customers each paying €10 per month for their service, the MRR would be €1,000. If another 20 customers join mid-month on the same plan, the MRR at the beginning of the next month would be €1,200.
MRR helps companies track growth over time, forecast future revenue, and understand the effectiveness of their sales and marketing efforts. It's especially important for Software as a Service (SaaS) businesses, where customer retention and predictable revenue streams are key for stability and growth.
However, MRR doesn't account for one-time fees, such as setup or installation fees, nor does it factor in variable usage fees in companies that charge based on level of usage. Moreover, it doesn't take into account any potential churn, or loss of customers, which can reduce revenue over time. That's why businesses often use MRR alongside other metrics, such as churn rate and customer acquisition cost, to get a full picture of their financial performance.
