What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is the predictable revenue that a SaaS business can expect to receive every month.
Detailed Explanation
MRR is a measure of the predictable and recurring revenue components of your subscription business. It excludes one-time and variable fees. For a SaaS business, MRR is a key performance indicator (KPI) that helps measure the size and growth rate of the business. It includes new business MRR, expansion MRR (upsells and cross-sells), and churned MRR (lost business). Understanding the Importance of Churn Rate is crucial in this context, as it directly impacts the MRR.
Why It Matters?
MRR is a crucial metric for any SaaS business. It provides a clear snapshot of your company’s financial health and the reliability of its revenue stream. MRR can help to plan for the future, make informed business decisions, and track the company’s growth over time.
Potential Misunderstandings
A common misunderstanding is that MRR and revenue are the same. While related, MRR refers to the predictable and recurring revenue, excluding one-time or variable payments.
Frequently Asked Questions
1. What’s the difference between MRR and ARR in a SaaS business?
MRR refers to the predictable monthly revenue, while ARR (Annual Recurring Revenue) is the value of the recurring revenue in a one-year period. ARR equals MRR multiplied by 12. You can learn more about this in our article on ARR.
2. How can a SaaS business increase its MRR?
SaaS businesses can increase MRR by acquiring new customers, reducing churn, and increasing the value of existing customers through upselling and cross-selling.