MRR: What it stands from and how to calculate MRR?

Jan. 28, 2019, 11:48 a.m.

1 Answer

Feb. 1, 2019, 3:51 p.m.


Regular monthly income, or MRR (Monthly Recurring Revenue), is the foundation of any SaaS business, making it so attractive in the eyes of entrepreneurs. You do not need to worry about maintaining the required level of unit sales: all payments are made by customers automatically - in the form of a monthly subscription fee. Cloud-based systems are an excellent investment protection for both customers and vendors. They help to avoid significant one-time investments in the purchase, installation and maintenance of licensed software, since all the management of the IT system lies on the developer’s shoulders and is included in the rental price. Sellers sleep well: while the client uses the service, his income is guaranteed. However, this gold mine, this wonderful SaaS metric has some features that you should consider depending on your business model. Consider them in more detail.

So, MRR is a regular income, reduced to some monthly value. This indicator averages all your tariff plans and billing periods and reduces them to one common value, which allows you to track changes over time. But how to calculate it correctly? This method of calculating client-to-client is extremely inconvenient: as a rule, more than two clients use the service, their number constantly changes, sometimes they can switch to a different tariff or refuse services altogether, and each time you will not be able to recalculate the MRR manually under the force

One of the surest ways to keep your business growing is expanding your MRR, or increasing your profits with existing customers. If you achieve that extended regular monthly income covers your losses from user churn, then in fact you can remember this unpleasant indicator, which will be considered as negative churn. In this case, the outflow of users does not change your current MRR, and new customers become a constant source of additional income. You can expand the MRR by switching customers to a more expensive tariff, for example, including additional options in the package or increasing the number of users (if you use the per-user calculation system).