MRR (Monthly Recurring Revenue)
MRR definition for SaaS and AI founders: what it means, how to calculate it, and common pitfalls when reading it in dashboards.
MRR is the monthly value of every active subscription, normalized to one month. Annual plans count as one-twelfth of their price; discounts are applied; tax, trials and usage-based charges are excluded.
Formula
MRR = Σ (subscription price ÷ months in billing interval) after discounts
In practice
MRR is a run-rate, not revenue earned. Use it for growth and retention; use revenue for gross margin.
Related terms
Related
- ARPAAverage MRR per paying customer.
- ARRAnnualized recurring revenue: MRR multiplied by twelve.
- CACSales and marketing spend per new customer.
- ChurnCustomers or recurring revenue lost in a period.
- COGSThe direct cost of delivering your product to existing customers.
- Contribution marginRevenue minus all variable costs, including variable sales costs.
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