Business
What is MRR & ARR?
MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) measure predictable subscription revenue. They are the primary metrics for subscription businesses.
Definition
Monthly Recurring Revenue (MRR) is the predictable revenue a subscription business earns each month. Annual Recurring Revenue (ARR) is MRR multiplied by 12. These metrics are foundational for SaaS businesses because they show predictable, recurring income. MRR components include new MRR (new customers), expansion MRR (upgrades), and churned MRR (cancellations). Net MRR growth = New + Expansion - Churned.
Key Points
- MRR = Monthly Recurring Revenue
- ARR = MRR x 12 (Annual Recurring Revenue)
- Net MRR = New + Expansion - Churned
- Primary metrics for SaaS valuation
- Predictability is key value driver
Examples
- 1.100 customers at 50/month = 5k MRR = 60k ARR
- 2.10% MRR growth month-over-month
- 3.SaaS valued at 5-10x ARR
Frequently Asked Questions
Related Terms
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