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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.
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.
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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