MRR Formula: The Complete
Monthly Recurring Revenue Guide
Master the MRR formula for subscriptions and SaaS: calculate MRR, ARR, net new MRR, and use recurring revenue for growth and valuation.
The MRR Formula
ARR = MRR × 12
Revenue that repeats each billing cycle (subscriptions, memberships, contracts).
Monthly = 1, quarterly = 3, annual = 12. Normalize everything to monthly.
Predictable revenue per month. Use for growth, churn, and valuation.
Quick Example
150 customers at $40/month and 30 annual at $360/year.
MRR = (150 × $40) + (30 × $360 ÷ 12) = $6,000 + $900 = $6,900
ARR = $6,900 × 12 = $82,800.
See Recurring Revenue and Retention
StoreRadar helps you understand subscription and repeat purchase behavior so you can track MRR-style metrics alongside orders and LTV.
MRR Formula Variations
Basic MRR, ARR, net new MRR, and retention
Normalize annual to monthly by dividing by 12; quarterly by 3.
Annual Recurring Revenue; same concept, different time frame.
Expansion = upgrades; contraction = downgrades.
Useful for comparing plans and ARPU (Average Revenue Per User).
Shows how much of starting MRR you kept (excluding new).
Worked Examples
Step-by-step MRR and ARR calculations
Basic MRR from Mixed Plans
You have 200 monthly subscribers at $25/month and 80 annual subscribers at $240/year.
- 1 Monthly: 200 × $25 = $5,000
- 2 Annual (normalize to monthly): 80 × ($240 ÷ 12) = 80 × $20 = $1,600
- 3 MRR = $5,000 + $1,600 = $6,600
- 4 ARR = $6,600 × 12 = $79,200
MRR is $6,600; ARR is $79,200.
Always normalize to one period. Use MRR for monthly trends and ARR for annual planning.
Net New MRR Calculation
Start of month MRR $50,000. New customers added $4,000; upgrades added $1,200; churn lost $2,500; downgrades lost $800. End MRR $51,900.
- 1 New MRR = $4,000 + $1,200 = $5,200
- 2 Lost MRR = $2,500 + $800 = $3,300
- 3 Net new MRR = $5,200 − $3,300 = $1,900
- 4 Check: $50,000 + $1,900 = $51,900 ✓
Net new MRR is $1,900 (3.8% growth).
Track new, expansion, churn, and contraction separately to see which lever moves the needle.
MRR Per Customer (ARPU)
MRR is $12,000 and you have 400 paying customers.
- 1 MRR = $12,000
- 2 Customers = 400
- 3 MRR per customer = $12,000 ÷ 400 = $30
Each customer contributes $30/month on average.
Use for pricing decisions and to compare segments (e.g. monthly vs annual plan ARPU).
MRR Benchmarks by Type
Typical MRR per customer (ranges vary)
| Type | Typical | Notes |
|---|---|---|
| SaaS (SMB) | Varies widely | Often $50–200 MRR per customer |
| SaaS (Mid-market) | $500–2,000/customer | Higher ACV, lower volume |
| Subscription box | $25–50/customer | Consumer, high volume |
| Membership / DTC club | $15–40/customer | Recurring access or product |
Common MRR Mistakes
Errors that distort recurring revenue
Including One-Time Revenue
Adding setup fees, one-time purchases, or non-recurring revenue into MRR.
MRR should only include revenue that repeats every billing cycle. Track one-time revenue separately.
Wrong Normalization
Treating annual contract value as MRR without dividing by 12, or mixing weekly and monthly.
Normalize every plan to monthly: annual ÷ 12, quarterly ÷ 3. Be consistent.
Counting Cancelled Before Period End
Including revenue from customers who cancelled during the period as if they paid the full period.
Use MRR at a point in time (e.g. end of month) or prorate cancellations to the date they churned.
Confusing MRR with Cash
MRR is recognized revenue (subscription), not necessarily cash collected in the month.
For cash flow use cash received. For growth and retention metrics use MRR. Don't mix them.
How to Track MRR for WooCommerce
Ways to monitor Monthly Recurring Revenue and subscription metrics
Option 1: Spreadsheets
Export subscription and billing data, normalize plans to monthly, and sum. Requires manual updates and careful handling of proration and churn.
- Full control
- No extra cost
- Time-consuming
- Error-prone
- No real-time view
Option 2: Billing or Subscription Tool
Tools like Stripe Billing, Chargebee, or Recurly calculate MRR and churn. Best if your entire revenue is through that system.
- Accurate MRR
- Built-in metrics
- May not include all revenue
- Extra cost
Option 3: StoreRadar
StoreRadar tracks recurring behavior and revenue for WooCommerce subscriptions and memberships, so you can see MRR-style metrics alongside order and retention data.
- Unified with orders
- Retention and LTV context
- Real-time
- Monthly subscription
Related Formulas
MRR ties to churn, LTV, and retention
| Formula | Calculation | Relationship |
|---|---|---|
| ARR | MRR × 12 | Annual view of recurring revenue |
| Churn Rate | (Revenue Lost ÷ MRR at Start) × 100 | MRR churn drives net new MRR |
| LTV | ARPU × (1 ÷ Churn) | Subscription LTV often uses MRR and churn |
| CAC Payback | CAC ÷ (MRR per customer) | Months to recover acquisition cost |
| Net Revenue Retention | (MRR end − churn − contraction + expansion) ÷ MRR start | Revenue retention from existing customers |
Frequently Asked Questions
Common questions about MRR
MRR (Monthly Recurring Revenue) = Sum of all recurring revenue normalized to a monthly amount. For example: 100 customers at $30/month = $3,000 MRR. Annual plans: divide by 12 (e.g. $120/year = $10 MRR per customer).
MRR is monthly recurring revenue; ARR (Annual Recurring Revenue) = MRR × 12. ARR is often used for reporting and valuation. Both measure predictable, recurring revenue from subscriptions or contracts.
Convert everything to monthly: monthly plans count as-is; annual plans divide by 12. Example: 80 × $20/month + 20 × $180/year → 80 × $20 + 20 × ($180 ÷ 12) = $1,600 + $300 = $1,900 MRR.
Net new MRR = New MRR (from new customers + expansion/upgrades) − Churned MRR (cancellations + downgrades). It shows how much recurring revenue grew or shrank in a period. Negative net new MRR means you're losing more than you're gaining.
MRR is most relevant for subscription and SaaS businesses. Ecommerce can use it if you have subscriptions, memberships, or recurring orders. For one-time sales, use total revenue and track repeat purchase rate instead.
Varies by stage. Early-stage SaaS often targets 10–20% month-over-month; growth slows as base grows. Healthy subscription businesses often aim for 5–15% quarterly MRR growth. Compare to your cohort and industry.
Track Recurring Revenue and Retention
StoreRadar helps you see subscription and repeat purchase behavior alongside orders and LTV—so you can grow MRR and retention together.
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