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E-commerce Monthly Recurring Revenue (MRR)
revenueThe predictable, normalized monthly revenue generated from all active subscriptions. MRR is the fundamental metric for subscription-based businesses.
Definition
Monthly recurring revenue is the heartbeat of any subscription business. Unlike one-time sales, MRR provides predictable, compounding revenue that makes business planning possible. It normalizes annual, quarterly, and monthly subscriptions into a single monthly figure. A customer paying $1,200/year contributes $100/month to MRR.
MRR is typically decomposed into components: New MRR (from new customers), Expansion MRR (from upgrades), Contraction MRR (from downgrades), and Churned MRR (from cancellations). Net New MRR = New + Expansion - Contraction - Churned. This decomposition reveals the dynamics beneath headline growth and shows whether growth is healthy or masking underlying problems.
Investors value MRR-based businesses highly because recurring revenue is predictable and compounds over time. A $100K MRR business growing at 10% monthly will reach $1.2M MRR within a year. The predictability also enables confident hiring, infrastructure investment, and strategic planning that businesses dependent on one-time sales cannot match.
Formula
MRR = Sum of (Monthly Subscription Revenue from All Active Customers) Example
A SaaS company has 100 customers on the $49/month plan, 50 on the $99/month plan, and 10 on the $299/month plan. MRR = (100 x $49) + (50 x $99) + (10 x $299) = $4,900 + $4,950 + $2,990 = $12,840.
Related Terms
Annual Recurring Revenue (ARR)
revenueThe annualized value of recurring subscription revenue. Calculated by multiplying MRR by 12, ARR is the standard metric for measuring the scale of a subscription business.
Net Revenue Retention (NRR)
growthThe percentage of recurring revenue retained from existing customers over a period, including expansion revenue (upgrades, cross-sells) and subtracting contraction and churn.
Churn Rate
growthThe percentage of customers who cancel or stop using a product or service during a given time period. It is the inverse of retention rate.
Average Revenue Per User (ARPU)
revenueThe mean revenue generated per active user or customer account over a specific period. It measures pricing efficiency and customer value.
Put It Into Practice
Use these calculators to apply monthly recurring revenue (mrr) to your own numbers.
Subscription Revenue Calculator
Project your MRR, ARR, and net revenue retention over time.
Open calculator →Churn Rate Calculator
Calculate customer and revenue churn rates with annualized projections.
Open calculator →Burn Rate & Runway Calculator
Calculate your startup burn rate, runway, and projected break-even with revenue growth.
Open calculator →