How to Calculate Monthly Recurring Revenue in SaaS
Monthly Recurring Revenue (MRR) is the primary operating metric for subscription software companies. MRR normalizes varying billing cycles and contract lengths into a predictable monthly figure, enabling accurate financial modeling.
Tracking clean MRR requires isolating recurring subscription fees from one-time setup charges, professional consulting retainers, and hardware fees.
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The Core MRR Formula
Basic Monthly Recurring Revenue is computed by multiplying active paying subscribers by your average revenue per user and adding recurring add-on charges:
Let us review an example calculation:
- Active Subscribers: 250
- Base Tier ARPU: $49.00
- Base Recurring Revenue: 250 x $49.00 = $12,250.00
- Monthly Add-on & Seat Revenue: $1,250.00
- Total MRR: $12,250 + $1,250 = $13,500.00 MRR
Converting MRR to Annual Run Rate (ARR)
To project your annual recurring revenue run rate based on current monthly performance:
ARR = MRR x 12
With $13,500 MRR, your annualized run rate is $13,500 x 12 = $162,000.00 ARR.
Calculate your subscription metrics quickly using our free MRR Calculator.
