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Mobius
Intermediate

What is MRR

Full name: Monthly Recurring Revenue

Also known as: monthly recurring revenue, recurring monthly revenue, how to calculate MRR, MRR formula, net new MRR

Definition

MRR (monthly recurring revenue) is what active subscriptions and retainers are worth per month, without one off fees. 40 members at ₪350 is ₪14,000 MRR.

Why it matters

MRR is the monthly income base the business can count on before it sells anything new, so salaries, rent and marketing can be planned against it.

Common mistakes

Counting one off setup fees, projects or consulting work as MRR.

Related terms

Worked exampleIllustration

A Pilates studio's MRR for one month

Membership sheet, end of the month

  • Members at the start, 40 × ₪350₪14,000
  • New members, 6 × ₪350+₪2,100
  • Moved up to ₪450, 4 members+₪400
  • Moved down to ₪250, 2 members-₪200
  • Left, 3 members-₪1,050
  • Registration fee, one off, not MRR₪200
  • MRR at the end of the month₪15,250

Steps

  1. Start of the month: 40 members on the ₪350 plan.₪14,000

  2. Six new members join at ₪350 each.+₪2,100

  3. Four members move up to the ₪450 plan, ₪100 more each.+₪400

  4. Two members move down to the ₪250 plan, ₪100 less each.-₪200

  5. Three members on the ₪350 plan leave.-₪1,050

  6. End of the month: 14,000 + 2,100 + 400 - 200 - 1,050.₪15,250

Net new MRR is ₪1,250. A ₪200 registration fee is not MRR, and a member who prepaid ₪3,600 for the year counts as ₪300 a month. Only to stand still, the studio needs 4 new members a month: the ₪1,050 of members who left plus the ₪200 of downgrades is ₪1,250, the price of 3.6 plans of ₪350. So 4 of the 6 new members only replaced what leaked out.

Illustration

A bucket with a tap and a leak

  1. MRR at the start of the month₪14,000
  2. New members+₪2,100
  3. Members who moved up a plan+₪400
  4. Members who moved down a plan-₪200
  5. Members who left-₪1,050
  6. MRR at the end of the month₪15,250

Where the month started

MRR went from ₪14,000 to ₪15,250, net new MRR of ₪1,250. Growth is what pours in minus what leaks out.

4 new members a month only to stand still

  • Replaces what leaked out
  • Real growth

Members who left or moved down took ₪1,250 of MRR, the price of 3.6 plans. So 4 of the 6 new members only replaced them, and 2 are growth. Shrink the leak and more of every month's sales becomes growth.

The Pilates studio's month: new members and upgrades pour in, downgrades and members who leave drain out.

Definition

MRR, short for monthly recurring revenue, is the monthly value of every recurring agreement a business has today: subscriptions, memberships, retainers and maintenance contracts. It is normalised to one month, so an annual plan counts as its price divided by 12, a discount lowers it, and one off charges such as setup fees or a single project stay out. A customer on a free trial who has not paid yet is a lead, not MRR. The subscription analytics company ChartMogul splits each month's change into five movements: new business, expansion, contraction, churn and reactivation. Ending MRR is starting MRR plus new, expansion and reactivation, minus contraction and churn. Subscribers times the average fee is only a quick estimate, and it breaks once plans, discounts and annual plans differ. On this site MRR is counted without VAT, the same as revenue.

Why it matters

Its five movements show where growth comes from and where it leaks. MRR is not cash, though: a member who prepays ₪3,600 for a year brings ₪3,600 into the bank this month and adds ₪300 to MRR.

Directly related: ARR, Churn, NRR.

Formula

MRR = Total Subscribers * Average Monthly Revenue Per Subscriber

Improvement tips

  • Track the five movements every month, not only the total. A flat MRR can hide strong sales and equally strong cancellations.
  • Grow MRR from existing customers with a higher plan or a recurring add on, and cut early cancellations with a good first month.
  • Count annual plans at their monthly share, and keep setup fees and one off projects in revenue, not in MRR.
  • Compare MRR with your monthly fixed costs. Once MRR covers them, rent and salaries no longer depend on this month's new sales.

Common mistakes

  • Counting an annual payment in full in the month it arrives instead of dividing it by 12.
  • Counting customers on a free trial, or on a 100% discount, before they pay.
  • Reading MRR as cash in the bank, or as a forecast of what will arrive.
MRR vs ARR

Related terms

FinanceIntermediate

ARR

ARR (annual recurring revenue) is the yearly value of the recurring subscriptions and contracts active today, usually MRR × 12. A snapshot, not a forecast.

FinanceIntermediate

Churn

Churn is the share of customers, or of recurring revenue, lost in a period: those who left in a month divided by those at its start. 5% a month is 46% a year.

FinanceAdvanced

NRR

NRR (net revenue retention) is the share of last year's recurring revenue the same customers pay now, upgrades and cancellations included. Over 100% is growth.

FinanceIntermediate

LTV

LTV (customer lifetime value) is the gross profit one customer brings over the whole relationship. You compare it with the cost of winning that customer (CAC).

FinanceBeginner

Runway

Runway is the number of months a business can keep going on the cash it has today, at its current pace of spending and income: cash divided by monthly net burn.

TechnologyBeginner

SaaS

SaaS (Software as a Service) is software you rent by subscription and use in a browser or an app, with nothing to install. The vendor hosts and updates it.

Quick check

A member prepays ₪3,600 for a year. How much does that add to MRR?

Choose an answer

Frequently asked questions

Do I need to understand MRR before starting a subscription business?
Yes. MRR tells you, month by month, whether memberships or retainers are enough to carry the business, and it is the number you will set your first year's goals in.
When does MRR first become relevant for a new business?
From the first customer who pays you every month. Start a simple sheet then: who pays, how much, since when, and when anyone changes plan or leaves.
How do I estimate MRR before launch?
Multiply the members or clients you expect by the planned monthly price, month by month, and subtract the ones you expect to lose. It is a planning estimate. Real MRR counts only customers who actually pay.
Is MRR relevant for a business without a subscription model?
Yes, if any part of the business repeats every month: a monthly retainer, a membership, a maintenance contract or a standing order. Only a business that sells purely one off has no MRR, and there repeat purchases and churn are the useful numbers.
Why does MRR matter for a business already running?
It separates the income you can count on from this month's one off sales, so hiring and rent decisions rest on a base that does not vanish in a slow month. Its movements show whether growth comes from new customers, from upgrades or from both.
What goes wrong when a business ignores its MRR?
A busy month of one off sales hides a shrinking base. By the time total revenue drops, the members who left months ago are hard to win back.
How do I track MRR without stopping day to day work?
Most billing and payment tools report it. If you invoice by hand, keep one sheet of active agreements and update it at month end with new customers, upgrades, downgrades and cancellations.
How can a subscription business grow its MRR?
Three levers: new customers, existing customers moving to a higher plan or adding a service, and fewer cancellations. The third is often the cheapest, because every member you keep is one you do not have to replace.
What does MRR mean in plain words?
It is the total of your monthly subscriptions and retainers as of today. It is not a forecast of next month and not the balance in the bank.
Is MRR complicated to calculate?
Not with one plan and monthly billing: members times the price. It needs care once there are annual plans, discounts or several plans, because each one counts at its monthly value.
Do I need an accountant to calculate MRR?
No. MRR is a management number, not an accounting report, and you can keep it yourself or read it from your billing tool. The revenue your accountant reports is a different number.
Should I include one off setup fees in my MRR?
No. Setup fees, registration fees and single projects are revenue but not recurring, so they stay out of MRR. Recurring add ons, such as an extra monthly service, belong in it.

Sources: ChartMogul, Monthly Recurring Revenue (MRR), chartmogul.com, read September 2026, ChartMogul Help Center, Understanding MRR movements, read September 2026

Last reviewed: 2026-09-23

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