{"id":25635,"date":"2025-10-31T16:05:09","date_gmt":"2025-10-31T16:05:09","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?post_type=sage_glossary&#038;p=25635"},"modified":"2025-10-31T16:05:11","modified_gmt":"2025-10-31T16:05:11","slug":"what-is-monthly-recurring-revenue-mrr","status":"publish","type":"sage_glossary","link":"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/what-is-monthly-recurring-revenue-mrr\/","title":{"rendered":"MRR: What it is and how to calculate monthly recurring revenue\u00a0"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/\" class=\"entry-header__link\">Glossary definition<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tMRR: What it is and how to calculate monthly recurring revenue\u00a0\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"MRR: What it is and how to calculate monthly recurring revenue\u00a0\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/what-is-monthly-recurring-revenue-mrr\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n\n\n<p>If you\u2019re running a SaaS business or working in financial operations, you\u2019ve probably come across MRR. But what does MRR stand for\u2013 and why does it matter so much to your business?\u00a0<\/p>\n\n\n\n<p>Monthly recurring revenue (MRR) is one of the most important metrics for any subscription-based company. It represents the predictable income you earn each month from recurring payments, such as subscriptions, retainers, or ongoing service contracts. Unlike one-off sales or project fees, MRR gives you a stable, consistent view of your revenue and helps you plan with confidence.&nbsp;<\/p>\n\n\n\n<p>This guide will walk you through what MRR means, how to calculate it accurately, and how to use it to grow your business more strategically.\u00a0<\/p>\n\n\n\n<p>Here&#8217;s what we discuss:<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-monthly-recurring-revenue-mrr-nbsp\" data-level=\"2\">What is monthly recurring revenue (MRR)? &nbsp;<\/a><\/li><li><a href=\"#h-why-mrr-matters-nbsp\" data-level=\"2\">Why MRR matters &nbsp;<\/a><\/li><li><a href=\"#h-how-to-calculate-mrr-nbsp\" data-level=\"2\">How to calculate MRR &nbsp;<\/a><\/li><li><a href=\"#h-types-of-mrr-nbsp\" data-level=\"2\">Types of MRR &nbsp;<\/a><\/li><li><a href=\"#h-common-mistakes-when-calculating-mrr-nbsp\" data-level=\"2\">Common mistakes when calculating MRR &nbsp;<\/a><\/li><li><a href=\"#h-ways-to-increase-mrr-nbsp\" data-level=\"2\">Ways to increase MRR &nbsp;<\/a><\/li><li><a href=\"#h-what-is-considered-a-high-mrr-nbsp\" data-level=\"2\">What is considered a high MRR? &nbsp;<\/a><\/li><li><a href=\"#h-handling-variable-or-usage-based-billing-in-mrr-calculation-nbsp\" data-level=\"2\">Handling variable or usage-based billing in MRR calculation &nbsp;<\/a><\/li><li><a href=\"#h-action-steps-with-saas-accounting-and-subscription-management-software-nbsp\" data-level=\"2\">Action steps with SaaS accounting and subscription management software &nbsp;<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-monthly-recurring-revenue-mrr-nbsp\"><strong>What is monthly recurring revenue (MRR)?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>In simple terms, monthly recurring revenue (MRR) is the total amount of predictable revenue you can expect to receive from your customers each month based on their subscription payments.&nbsp;<\/p>\n\n\n\n<p>MRR is a normalised figure, reflecting your monthly earnings, even if customers are billed quarterly or annually.&nbsp;&nbsp;<\/p>\n\n\n\n<p>For example, if you have 100 customers paying \u00a350 per month, your MRR would be \u00a35,000.&nbsp;<\/p>\n\n\n\n<p>Because MRR focuses solely on recurring revenue, it provides a consistent method for measuring and tracking your business\u2019s financial performance over time.&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>Here\u2019s what\u2019s included\u2014and what isn\u2019t:<\/strong>&nbsp;<\/p>\n\n\n\n<p><strong>MRR includes:<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Subscription payments (monthly, quarterly, or annual converted to a monthly value).\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revenue from paid plans or recurring retainers.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Add-ons or upgrades that recur monthly.\u00a0<\/li>\n<\/ul>\n\n\n\n<p><strong>MRR omits:<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>One-time purchases or setup fees.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Trial accounts (until they convert to paid).\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Refunds or chargebacks.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-mrr-matters-nbsp\"><strong>Why MRR matters<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Whether you\u2019re a founder, CEO, or finance professional, understanding your MRR gives you a clear view of your company\u2019s financial health. It enables more informed decisions across key areas of your business, from team growth to product development and strategic planning.&nbsp;<\/p>\n\n\n\n<p>Here are just a few ways MRR supports smarter decision-making:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Financial forecasting: <\/strong>predict future cash flow with greater accuracy.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Business valuation: <\/strong>a consistent, growing MRR is highly attractive to investors.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Growth tracking: <\/strong>monitor whether your revenue is increasing month over month.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Resource planning: <\/strong>make informed decisions about hiring, product development, or market expansion.\u00a0<\/li>\n<\/ul>\n\n\n\n<p>For example, if your MRR has increased by 15% over the last three months, that could be a clear sign you\u2019re ready to scale, perhaps by growing your customer success team or rolling out new features.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-calculate-mrr-nbsp\"><strong>How to calculate MRR<\/strong>&nbsp;<\/h2>\n\n\n\n<p>The basic monthly recurring revenue formula is straightforward:&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>MRR Formula = <\/strong>Total monthly revenue from all active subscriptions&nbsp;<\/p>\n\n\n\n<p>However, an accurate monthly recurring revenue calculation requires close attention to billing frequencies, discounts, and changes to subscription plans.&nbsp;<\/p>\n\n\n\n<p>Here\u2019s a simple example:&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-data\"><table class=\"has-fixed-layout\"><thead><tr><th><strong>Subscription tier<\/strong>\u00a0<\/th><th><strong>Number of customers<\/strong>\u00a0<\/th><th><strong>Monthly price<\/strong><\/th><th><strong>MRR contribution<\/strong>\u00a0<\/th><\/tr><\/thead><tbody><tr><td>Basic<strong>\u00a0<\/strong>\u00a0<\/td><td>50&nbsp;<\/td><td>\u00a320&nbsp;<\/td><td>\u00a31,000&nbsp;<\/td><\/tr><tr><td>Pro<strong>\u00a0<\/strong>\u00a0<\/td><td>30&nbsp;<\/td><td>\u00a350&nbsp;<\/td><td>\u00a31,500&nbsp;<\/td><\/tr><tr><td>Enterprise\u00a0\u00a0<\/td><td>10&nbsp;<\/td><td>\u00a3200&nbsp;<\/td><td>\u00a32,000&nbsp;<\/td><\/tr><tr><td><strong>Total MRR<\/strong>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td><strong>\u00a34,500\u00a0<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Below are the key steps involved in calculating MRR effectively:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-sum-up-revenue-from-each-live-subscription-nbsp\"><strong>1. Sum up revenue from each live subscription<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Start by identifying all your active, paying customers. Cancelled or paused accounts should be excluded.&nbsp;<\/p>\n\n\n\n<p>For example, imagine you have:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>10 users on a \u00a325 plan = \u00a3250\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>20 users on a \u00a350 plan = \u00a31,000\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>MRR <\/strong>= \u00a31,250\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Your MRR calculation provides a snapshot of your current, recurring revenue from active subscriptions.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-normalise-annual-or-quarterly-payments-nbsp\"><strong>2. Normalise annual or quarterly payments<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Some customers may be billed quarterly or annually. To calculate MRR accurately, convert these payments into a monthly equivalent.&nbsp;<\/p>\n\n\n\n<p>For instance, imagine:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A customer pays \u00a31,200 annually\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\u00a31,200 \u00f7 12 = \u00a3100 MRR\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Remember, MRR reflects when the service is delivered, not when the payment is received.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-include-discounts-and-coupons-nbsp\"><strong>3. Include discounts and coupons<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Discounts\u2014temporary promotions or long-term deals\u2014should always be factored into your MRR calculation to reflect actual revenue.&nbsp;<\/p>\n\n\n\n<p>For example:&nbsp;&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A customer is on a \u00a3100\/month plan\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>With a 20% discount, they pay \u00a380\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>MRR<\/strong> = \u00a380\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Temporary discounts should be applied only for the duration of the offer, while permanent discounts should be included consistently each month.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-types-of-mrr-nbsp\"><strong>Types of MRR<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Splitting MRR into three main categories allows you to understand where your revenue is coming from (or going to). These categories include:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-new-mrr-nbsp\"><strong>1. New MRR<\/strong>&nbsp;<\/h3>\n\n\n\n<p>New MRR is the revenue you earn from customers who signed up for the first time this month. It\u2019s one of the most evident signs that your marketing and sales efforts are working.&nbsp;<\/p>\n\n\n\n<p>Formula:&nbsp;<\/p>\n\n\n\n<p><strong>New MRR<\/strong> = MRR from customers acquired this month&nbsp;<\/p>\n\n\n\n<p>For example, if five new customers each sign up for a \u00a3100 plan, your New MRR is \u00a3500.&nbsp;<\/p>\n\n\n\n<p>Tracking new MRR helps you understand how well your acquisition strategies convert into revenue.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-expansion-mrr-nbsp\"><strong>2. Expansion MRR<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Expansion MRR comes from existing customers who upgrade their plans, add new features, or increase usage. It shows that customers are getting more value from your product and are willing to spend more.&nbsp;<\/p>\n\n\n\n<p>Formula:&nbsp;<\/p>\n\n\n\n<p><strong>Expansion MRR<\/strong> = Additional MRR from upgrades or add-ons&nbsp;<\/p>\n\n\n\n<p>For instance, if a customer upgrades from a \u00a350 plan to a \u00a375 plan, the \u00a325 difference is expansion MRR.&nbsp;<\/p>\n\n\n\n<p>Growth from expansion is often more cost-effective than acquiring new customers, so it\u2019s a key metric to watch.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-churned-mrr-nbsp\"><strong>3. Churned MRR<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Churned MRR is the revenue you lose when customers cancel or downgrade their subscriptions. It directly affects your growth and can signal product or customer experience issues that need attention.&nbsp;<\/p>\n\n\n\n<p>Formula:&nbsp;<\/p>\n\n\n\n<p><strong>Churned MRR <\/strong>= MRR lost from cancelled or downgraded accounts&nbsp;<\/p>\n\n\n\n<p>For example, if three customers on \u00a3100 plans cancel, your Churned MRR is \u00a3300.&nbsp;<\/p>\n\n\n\n<p>Monitoring churned MRR regularly helps you act early and keep overall MRR heading in the right direction.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-reactivation-mrr-nbsp\"><strong>4. Reactivation MRR<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Reactivation MRR is the revenue earned from previously churned customers who return and resubscribe. This metric allows you to measure the success of win-back campaigns and customer loyalty over time.&nbsp;<\/p>\n\n\n\n<p>Formula:&nbsp;<\/p>\n\n\n\n<p>Reactivation MRR = MRR from returning customers&nbsp;<\/p>\n\n\n\n<p>For example, if two customers reactivate their \u00a3100\/month plans, your Reactivation MRR is \u00a3200.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-common-mistakes-when-calculating-mrr-nbsp\"><strong>Common mistakes when calculating MRR<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Getting your MRR wrong can lead to misleading metrics and poor business decisions. Here are some common pitfalls to avoid:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-counting-one-time-payments-nbsp\"><strong>1. Counting one-time payments<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Including setup fees, onboarding costs, or one-off purchases in your MRR calculation can artificially inflate your numbers. These types of revenue aren\u2019t recurring and shouldn\u2019t be part of your MRR.&nbsp;<\/p>\n\n\n\n<p>To avoid this, track non-recurring revenue separately and keep it out of your monthly recurring revenue metrics.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-leaving-out-discounts-or-coupons-nbsp\"><strong>2. Leaving out discounts or coupons<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Suppose you ignore discounts\u2014temporary promotions or long-term deals\u2014you\u2019ll overstate your MRR. This can create a false sense of growth and lead to poor forecasting.&nbsp;<\/p>\n\n\n\n<p>To get an accurate picture of your recurring revenue, always use the actual amount billed after discounts when calculating MRR.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-ignoring-churn-or-upgrades-nbsp\"><strong>3. Ignoring churn or upgrades<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Failing to update your MRR when customers cancel, downgrade, or upgrade their plans leads to inaccurate reporting. Delays in recognising these changes can make your numbers look better\u2014or worse\u2014than they are.&nbsp;<\/p>\n\n\n\n<p>To stay accurate, make sure you have real-time tracking in place for all customer status changes.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-treating-mrr-as-booked-revenue-nbsp\"><strong>4. Treating MRR as booked revenue<\/strong>&nbsp;<\/h3>\n\n\n\n<p>MRR is a business metric used for planning, not a recognised accounting figure. It doesn\u2019t appear on financial statements like your income or balance sheets.&nbsp;<\/p>\n\n\n\n<p>Use MRR to guide internal decisions, such as growth planning or hiring, but rely on recognised revenue for official financial reporting.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-ways-to-increase-mrr-nbsp\"><strong>Ways to increase MRR<\/strong>&nbsp;<\/h2>\n\n\n\n<p>If you aim to grow your MRR sustainably, focus on strategies that bring in more revenue and maximise the value of your existing customer base. Here are three key areas that can make a meaningful impact:&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-adjust-pricing-or-package-tiers-nbsp\"><strong>1. Adjust pricing or package tiers<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Revisiting your pricing model can unlock new revenue without acquiring more customers. When your pricing reflects the value your product delivers, you create more opportunities for revenue growth.&nbsp;<\/p>\n\n\n\n<p>Consider these approaches:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Add premium tiers with advanced features.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Introduce usage-based pricing to align costs with value.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Bundle features to encourage upgrades.\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Even small changes to the pricing structure can significantly increase your MRR over time.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-expand-existing-accounts-nbsp\"><strong>2. Expand existing accounts<\/strong>&nbsp;<\/h3>\n\n\n\n<p>It\u2019s often more cost-effective to grow revenue from existing customers than to acquire new ones. Customers who already trust your product are more likely to spend more if given the right reasons.&nbsp;<\/p>\n\n\n\n<p>You could:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Offer add-ons or advanced feature sets.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Introduce pricing for teams or additional users.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Promote annual plans (and convert them to monthly equivalents for MRR).\u00a0<\/li>\n<\/ul>\n\n\n\n<p>These strategies help deepen customer relationships while boosting revenue.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-reduce-churn-nbsp\"><strong>3. Reduce churn<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Customer retention is one of the most powerful levers for increasing MRR. The longer customers stay, the more value they bring to your business.&nbsp;<\/p>\n\n\n\n<p>To reduce churn:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Improve the onboarding experience to set customers up for success.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Launch customer success programmes to offer ongoing support.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Introduce loyalty incentives to keep long-term users engaged.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-considered-a-high-mrr-nbsp\"><strong>What is considered a high MRR?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>What qualifies as a \u201chigh\u201d MRR depends on the stage of your business. If you\u2019re in the early stages of growth, achieving 10\u201315% month-over-month MRR growth is typically considered strong performance. A 5\u20137% monthly growth rate for more established or mature companies is still a solid indicator of healthy, sustainable progress.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-handling-variable-or-usage-based-billing-in-mrr-calculation-nbsp\"><strong>Handling variable or usage-based billing in MRR calculation<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Not all billing models are based on fixed fees. If your business includes usage-based pricing (common in SaaS platforms or agency services), you must estimate variable revenue when calculating MRR.&nbsp;<\/p>\n\n\n\n<p>There are three common methods to do this:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Minimum commitment method: <\/strong>use the lowest agreed-upon monthly spend from the customer\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Historical average method:<\/strong> base the estimate on actual usage over the past 3 to 6 months\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Forecasted usage method: <\/strong>use predictive models or expected usage patterns to estimate monthly revenue\u00a0<\/li>\n<\/ul>\n\n\n\n<p>For example, if a customer pays a fixed retainer of \u00a31,000 per month plus around \u00a3300 in usage-based fees, you could use the historical average of \u00a3300 (based on the past three months) to calculate:&nbsp;<\/p>\n\n\n\n<p><strong>MRR <\/strong>= \u00a31,000 + \u00a3300 = \u00a31,300&nbsp;<\/p>\n\n\n\n<p>Choose the method with the most reliable and consistent insight for your business model and billing structure.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-action-steps-with-saas-accounting-and-subscription-management-software-nbsp\"><strong>Action steps with SaaS accounting and subscription management software<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Manually tracking MRR can be time-consuming, error-prone, and difficult to scale. That\u2019s why high-growth SaaS and technology businesses rely on dedicated accounting and subscription management software to stay accurate and efficient.&nbsp;<\/p>\n\n\n\n<p>With the right solution in place, you can benefit from:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Real-time MRR tracking.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Detailed breakdowns by customer, product, or plan.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Automated adjustments for churn, upgrades, and discounts.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Seamless integration with your general ledger and CRM.\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Ready to take control of your SaaS monthly recurring revenue? Explore our <a href=\"https:\/\/www.sage.com\/en-us\/industry\/subscription-saas\/\" target=\"_blank\" rel=\"noreferrer noopener\">SaaS accounting and subscription management software<\/a> and gain the visibility to make smarter, faster business decisions.&nbsp;<\/p>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1761926474761\"><strong class=\"schema-faq-question\"><strong>1. What\u2019s the difference between MRR and ARR?\u00a0<\/strong><\/strong> <p class=\"schema-faq-answer\">ARR (Annual Recurring Revenue) is simply your MRR multiplied by 12. It\u2019s typically used for long-term planning and high-level financial reporting.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1761926487027\"><strong class=\"schema-faq-question\"><strong>2. How does MRR differ from recognised revenue?\u00a0<\/strong><\/strong> <p class=\"schema-faq-answer\">MRR is a metric used for internal forecasting and decision-making. Recognised revenue, on the other hand, follows formal accounting standards and is reported in your financial statements.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1761926497952\"><strong class=\"schema-faq-question\"><strong>3. Should free trial users be included in MRR?\u00a0<\/strong><\/strong> <p class=\"schema-faq-answer\">No, free trial users should not be included in MRR calculations unless they convert to a paid plan. However, it\u2019s worth tracking conversion rates separately.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1761926508451\"><strong class=\"schema-faq-question\"><strong>4. How often should businesses review MRR?\u00a0<\/strong><\/strong> <p class=\"schema-faq-answer\">Most businesses review MRR monthly. If you\u2019re growing quickly or experiencing high churn, weekly reviews can help you respond more proactively.\u00a0<\/p> <\/div> <\/div>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscription management for SaaS and technology<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>Sage for SaaS and Technology provides SaaS billing, subscription management, and innovative business solutions to support the growth of your SaaS, tech, and AI company. Scale from \u00a35M to \u00a3500M, from start-up to IPO and beyond.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-gb\/industry\/subscription-saas\/#gate-e119943c-9216-4674-b4f6-c14bcbb19d077d-4d7d-b8a2-36493cb3d1ff\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-24876\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Take a product tour<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1261563958-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1261563958-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Join more than 500,000 UK readers and get the best business admin strategies and tactics, as well as actionable advice to help your company thrive, in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b1a63862-3fa0-4a5e-bb67-c76b88bbc6b8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Understanding your monthly recurring revenue (MRR) is vital to running a successful SaaS business. Whether you\u2019re seeking investment, planning growth, or tracking performance, understanding MRR gives you the clarity to make smarter decisions. <\/p>\n","protected":false},"author":280,"featured_media":16434,"template":"","meta":{"_sage_video":false,"footnotes":""},"tags":[223,135,180],"class_list":["post-25635","sage_glossary","type-sage_glossary","status-publish","has-post-thumbnail","hentry","tag-accountant-accounting","tag-business-finances","tag-business-performance"],"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice UK","distributor_original_site_url":"https:\/\/www.sage.com\/en-gb\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary\/25635","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary"}],"about":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/types\/sage_glossary"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/users\/280"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary\/25635\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media\/16434"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media?parent=25635"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/tags?post=25635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}