Vareto Finance Glossary
Monthly Recurring Revenue (MRR)
Description
Monthly Recurring Revenue (MRR) is an indicator of how much revenue a business can derive from its active subscriptions in a month. This includes recurring income from coupons, discounts and add-ons. One-time fees are excluded. This metric is used to gauge a SaaS company's financial health and project its future earnings from active subscriptions.
Example
MRR is calculated as number of monthly subscribers times the average revenue per user (ARPU).Suppose a company has 5 subscribers enrolled on a $300 per month plan. MRR = (5* $300) = $1500If a customer is enrolled for annual subscriptions, MRR can be calculated as annual plan price by 12. This is then multiplied by the number of annual subscription customers.
Why it matters
MRR gives a clear view of a business's revenue potential. It also offers insights into how a business can grow apart from allowing it to track performance. Companies may also use MRR to forecast revenues and chalk out a budget.
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