What is Monthly Recurring Revenue (MRR)?
MRR is the predictable revenue a subscription business earns each month. It equals the number of active subscribers multiplied by their average monthly payment. MRR is the core health metric for SaaS, membership, and subscription businesses because it shows whether revenue is growing, flat, or declining.
What is the difference between MRR and ARR?
ARR (Annual Recurring Revenue) is simply MRR × 12. ARR is used for annual planning, investor reporting, and valuation discussions. MRR is used for month-to-month operations and forecasting. Neither metric includes one-time payments, setup fees, or variable usage revenue.
Net MRR growth = New MRR (from new customers) + Expansion MRR (upsells to existing customers) − Churned MRR (from cancellations) − Contraction MRR (downgrades). A positive net MRR growth means your subscription business is expanding. Negative net MRR means you are losing more than you gain.
What churn rate is acceptable for a subscription business?
For B2B SaaS, monthly churn below 2% is strong (annual churn ~22%). Below 1% is excellent. B2C subscription businesses often run higher churn (3–8% monthly) due to lower switching costs. Benchmark against your industry — churn that is acceptable for consumer apps may be fatal for enterprise software.