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Monthly Recurring Revenue (MRR)

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How is Monthly Recurring Revenue (MRR) calculated?

Monthly Recurring Revenue (MRR) formula

To calculate your MRR take the number of average revenue per account within a given period and multiply that by the total number of accounts during the same time period.

The MRR metric only counts active users who are currently subscribed to your service, so this calculation can be tricky when you're transitioning from one pricing plan to another or introducing new features that require different prices to access them.

What is Monthly Recurring Revenue (MRR)?

Monthly recurring revenue (MRR) is one of the top metrics that SaaS businesses use to measure and forecast their future subscription revenue. MRR is used for a variety of reasons; the top two are forecasting and measuring current growth. SaaS businesses have a predictable stream of revenue due to their subscription-based pricing models.

You can increase MRR by following these steps:

  • Increase the price of your product or service.
  • Introduce a new line of products and services.
  • Sign up more customers for annual contracts to decrease costs per customer acquisition (CAC).
  • Offer discounts on lifetime subscriptions, but not too often as it will devalue the offer.

The goal is to ensure that you are maximizing MRR while minimizing CAC so that you have a sustainable business model. You'll want to constantly be experimenting with different strategies to find which one works best for your company's specific needs and goals.

Why is Monthly Recurring Revenue (MRR) important?

MRR gives you an idea about how much customers will spend in total on your product over time, so it's important if your goal is to grow sustainably instead of maximizing short-term profits.

It also helps predict what kind of customer acquisition costs (CAC) you'll incur moving forward because those numbers tend not to change drastically once they're set as MRR does.

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Create a KPI for Monthly Recurring Revenue (MRR) to monitor it over time and an OKR to track your impact against it in Commonality.

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