How to calculate MRR
Monthly recurring revenue is the predictable revenue your active subscriptions bring in each month. Add up every subscription at its monthly value:
MRR = sum of (monthly price x active customers) for each plan
Yearly plans count at one twelfth of their price. Discounts count at the discounted price the customer actually pays. Free plans, trials that have not converted, and one-time payments do not count at all.
What belongs in MRR, and what does not
| Include | Leave out |
|---|---|
| Active monthly subscriptions at the price paid | Free trials and free plans |
| Yearly subscriptions divided by 12 | Setup fees and one-off services |
| Recurring add-ons and extra seats | Lifetime deals |
| Committed usage minimums | Variable usage above the minimum, tracked separately |
The five MRR movements
A single MRR total hides what happened. Breaking the month into movements shows whether growth comes from new customers or from existing ones, and where revenue leaks:
- New MRR from customers who started paying this month.
- Expansion MRR from upgrades, extra seats, and add-ons.
- Contraction MRR lost to downgrades.
- Churned MRR lost to cancellations.
- Reactivation MRR from past customers who came back. Count it with new MRR if you do not track it separately.
Net new MRR = new + expansion - contraction - churned
Common MRR mistakes
- Counting annual payments in full. It creates a fake spike in the month of payment and a fake drop in the eleven months after.
- Counting failed payments as revenue. A subscription whose card has failed for weeks is not recurring revenue yet. Many teams exclude it after the final retry fails.
- Mixing currencies at old exchange rates. Pick one reporting currency and convert consistently.
- Ignoring the movements. Flat MRR can mean nothing happened, or that strong sales are hiding heavy churn.
Sharing MRR in public
Many founders building in public post MRR every month. A real number with context, even a small one, builds more trust than a polished chart. Our guide to building a public metrics page covers what to share and what to keep private, and the churn rate calculator explains the revenue lost each month.
Frequently asked questions
- How do you calculate MRR?
- Add up the monthly value of every active subscription. For monthly plans that is the price times the customers on it. For yearly plans, divide the yearly price by 12 first.
- Do annual plans count as MRR?
- Yes, as one twelfth of the annual price each month. Counting a $490 annual payment as $490 of MRR in the month it is paid makes revenue look far more volatile than it is.
- What is the difference between MRR and ARR?
- ARR, annual recurring revenue, is MRR times 12. It describes the same subscriptions on a yearly scale and is more common for products sold on annual contracts.
- Should one-time payments be included in MRR?
- No. Setup fees, one-off services, and lifetime deals are real revenue, but they do not recur, so they belong outside MRR.
- What is net new MRR?
- New MRR plus expansion MRR, minus contraction and churned MRR. It is the change in recurring revenue over the month and the clearest single growth number for a subscription business.