How to Calculate MRR: Monthly Recurring Revenue Guide 2026
MRR is the foundation of SaaS metrics. Get it right and everything else follows.
Key Takeaways
- MRR = predictable monthly revenue from subscriptions
- Normalize all revenue to monthly terms
- Track MRR components separately (new, expansion, churn)
- Net New MRR is the key growth metric
- ARPU × Customers = quick MRR estimate
Basic MRR Formula
MRR = Sum of all monthly subscription revenue
Simple Example
| Customer | Monthly Plan | MRR |
|---|---|---|
| Customer A | $100/month | $100 |
| Customer B | $250/month | $250 |
| Customer C | $500/month | $500 |
| Total | $850 |
Normalizing Annual Plans
Convert annual plans to monthly equivalent.
Formula: Annual price ÷ 12 = Monthly MRR
Example
| Customer | Plan | Normalized MRR |
|---|---|---|
| Customer A | $100/month | $100 |
| Customer B | $1,200/year | $100 ($1,200 ÷ 12) |
| Customer C | $2,400/year | $200 ($2,400 ÷ 12) |
Note: Don't recognize full annual value upfront. MRR = recurring, predictable revenue.
MRR Components
New MRR
MRR from brand new customers.
Formula: Sum of first-month MRR from new customers
Expansion MRR
Additional MRR from existing customers.
Sources:
- Plan upgrades
- Seat additions
- Add-on purchases
- Usage increases
Formula: Sum of MRR increases from existing customers
Contraction MRR
MRR lost from downgrades (not churned).
Sources:
- Plan downgrades
- Seat reductions
- Feature removals
Formula: Sum of MRR decreases from existing customers
Churned MRR
MRR lost from cancelled customers.
Formula: Sum of MRR from customers who cancelled
Net New MRR
The most important growth metric.
Formula: New MRR + Expansion MRR - Contraction MRR - Churned MRR
Example
| Component | Amount |
|---|---|
| New MRR | $10,000 |
| Expansion MRR | $3,000 |
| Contraction MRR | -$1,000 |
| Churned MRR | -$2,000 |
| Net New MRR | $10,000 |
MRR Movement Report
Monthly MRR Report Template
| Metric | This Month | Last Month | Change |
|---|---|---|---|
| Starting MRR | $100,000 | $95,000 | +5.3% |
| New MRR | $8,000 | $7,000 | +14% |
| Expansion MRR | $4,000 | $3,500 | +14% |
| Contraction MRR | -$1,500 | -$1,000 | +50% |
| Churned MRR | -$2,500 | -$2,000 | +25% |
| Net New MRR | $8,000 | $7,500 | +7% |
| Ending MRR | $108,000 | $102,500 | +5.4% |
ARPU Calculation
ARPU = MRR ÷ Number of Customers
Example
- MRR: $100,000
- Customers: 200
- ARPU: $500/month
ARPU Trends
| Trend | What It Means |
|---|---|
| Increasing | Moving upmarket, successful upsells |
| Flat | Stable, possible stagnation |
| Decreasing | Downmarket shift, discount pressure |
Common MRR Mistakes
1. Including One-Time Revenue
Wrong: Adding setup fees to MRR Right: Only recurring subscription revenue
2. Full Annual Recognition
Wrong: $12,000 annual = $12,000 MRR Right: $12,000 annual = $1,000 MRR
3. Ignoring Discounts
Wrong: List price as MRR Right: Actual billed amount
4. Missing Components
Wrong: Tracking only total MRR Right: Tracking new, expansion, contraction, churn
5. Inconsistent Timing
Wrong: MRR on signup date Right: MRR when billing begins
MRR Benchmarks
Growth Rates
| Stage | Monthly Growth |
|---|---|
| Seed | 15-20% |
| Series A | 10-15% |
| Series B | 5-10% |
| Growth | 2-5% |
MRR Component Mix
| Component | Healthy % of Growth |
|---|---|
| New MRR | 60-80% |
| Expansion MRR | 20-40% |
| Churn | <5% of starting |
FAQ
MRR vs ARR—which should I use?
MRR for monthly tracking and operations. ARR for annual planning and investor communication. ARR = MRR × 12.
How do I handle usage-based pricing?
Estimate monthly usage for MRR. Update monthly based on actual usage. Track committed MRR separately from variable.
What about free trials?
Don't include free trials in MRR. Add to MRR when paid subscription begins.
How do I handle refunds?
Reduce MRR in the month refund occurs. Track refunds as a separate metric.
What's the difference between MRR and revenue?
MRR is normalized recurring revenue. Revenue (GAAP) is recognized per accounting rules. MRR is operational, revenue is financial.
Want MRR tracked automatically? Dewx OPS Hub calculates MRR and all components from your billing data.
