Monthly Recurring Revenue (MRR)¶

Definition¶

Monthly Recurring Revenue (MRR) is the total predictable revenue a company expects to generate from its subscription-based services or contracts on a monthly basis. It standardizes recurring income, offering a clear view of revenue trends.

Description¶

Monthly Recurring Revenue (MRR) is a key indicator of subscription growth and revenue predictability, reflecting the total recurring income generated from active customers each month.

Its importance varies across contexts:

In SaaS, it's used to track net new revenue, expansion, and churn
In freemium/PLG models, it highlights conversion and upgrade efficiency
In enterprise models, it reflects contract value and renewal velocity

A growing MRR signals customer growth, retention, or expansion, while a declining MRR flags churn or shrinking account value. By segmenting MRR by source, customer type, or product, you unlock insights to forecast growth, refine pricing, and reduce risk.

MRR informs:

Strategic decisions, like revenue forecasting and pricing models
Tactical actions, such as launching expansion plays or reactivating churned accounts
Operational improvements, including billing cycle optimization and pipeline predictability
Cross-functional alignment, enabling finance, CS, growth, and RevOps to collaborate on sustainable growth

Key Drivers¶

These are the main factors that directly impact the metric. Understanding these lets you know what levers you can pull to improve the outcome

New Customer Acquisition and Activation: Each new signup contributes to MRR. More customers, more recurring revenue.
Expansion vs. Churn Balance: Net MRR growth depends on upsells outpacing churn and downgrades.
Plan Structure and Billing Logic: Usage-based or annual billing converted to monthly recognition affects total MRR.

Improvement Tactics & Quick Wins¶

Actionable ideas to optimize this KPI, from fast, low-effort wins to strategic initiatives that drive measurable impact.

If MRR growth is slow, accelerate time-to-upgrade with usage nudges and fast paths to expansion.
Add upgrade prompts when users hit plan limits or unlock power features.
Run a QBR campaign with CS to revisit value metrics and propose plan reviews.
Refine pricing pages and checkout flows to upsell at the point of highest intent.
Partner with finance to identify MRR leakage due to failed payments or billing errors.

Required Datapoints to calculate the metric
- New MRR: Revenue added from new customers in a given month.
- Expansion MRR: Additional revenue from upsells, cross-sells, or upgrades.
- Churned MRR: Revenue lost due to downgrades or cancellations.
- Reactivation MRR: Revenue regained from previously churned customers.
Example to show how the metric is derived

A SaaS business calculates MRR for October:
- New MRR: $20,000
- Expansion MRR: $5,000
- Reactivation MRR: $2,000
- Churned MRR: $7,000
- Net MRR = (20,000 + 5,000 + 2,000) − 7,000 = $20,000

Formula¶

Formula

\[ \mathrm{Net\ MRR} = (\mathrm{New\ MRR} + \mathrm{Expansion\ MRR} + \mathrm{Reactivation\ MRR}) - \mathrm{Churned\ MRR} \]

Data Model Definition¶

How this KPI is structured in Cube.js, including its key measures, dimensions, and calculation logic for consistent reporting.

Revenue

cube('Revenue', {
  sql: `SELECT * FROM revenue`,
  measures: {
    newMrr: {
      sql: `new_mrr`,
      type: 'sum',
      title: 'New MRR',
      description: 'Revenue added from new customers in a given month.'
    },
    expansionMrr: {
      sql: `expansion_mrr`,
      type: 'sum',
      title: 'Expansion MRR',
      description: 'Additional revenue from upsells, cross-sells, or upgrades.'
    },
    churnedMrr: {
      sql: `churned_mrr`,
      type: 'sum',
      title: 'Churned MRR',
      description: 'Revenue lost due to downgrades or cancellations.'
    },
    reactivationMrr: {
      sql: `reactivation_mrr`,
      type: 'sum',
      title: 'Reactivation MRR',
      description: 'Revenue regained from previously churned customers.'
    },
    totalMrr: {
      sql: `${newMrr} + ${expansionMrr} - ${churnedMrr} + ${reactivationMrr}`,
      type: 'number',
      title: 'Total MRR',
      description: 'Total Monthly Recurring Revenue calculated as New MRR plus Expansion MRR minus Churned MRR plus Reactivation MRR.'
    }
  },
  dimensions: {
    id: {
      sql: `id`,
      type: 'string',
      primaryKey: true,
      title: 'ID'
    },
    customerId: {
      sql: `customer_id`,
      type: 'string',
      title: 'Customer ID'
    },
    createdAt: {
      sql: `created_at`,
      type: 'time',
      title: 'Created At'
    }
  }
});

Note: This is a reference implementation and should be used as a starting point. You’ll need to adapt it to match your own data model and schema

Positive & Negative Influences¶

Negative influences

Factors that drive the metric in an undesirable direction, often signaling risk or decline.
- Customer Churn: High churn rates reduce the customer base, directly decreasing MRR as lost customers no longer contribute to recurring revenue.
- Downgrades: Customers moving to lower-tier plans reduce their subscription value, negatively impacting MRR.
- Discounting Strategies: Excessive discounting can lower the average revenue per user, reducing overall MRR.
- Billing Errors: Frequent billing errors can lead to customer dissatisfaction and increased churn, negatively affecting MRR.
- Market Saturation: In highly saturated markets, acquiring new customers becomes challenging, limiting MRR growth potential.
Positive influences

Factors that push the metric in a favorable direction, supporting growth or improvement.
- New Customer Acquisition: An increase in new customer signups directly boosts MRR as each new customer adds to the recurring revenue base.
- Customer Activation: Higher rates of customer activation ensure that new signups are effectively contributing to MRR, as activated customers are more likely to continue their subscriptions.
- Upsells and Cross-sells: Successful upselling and cross-selling to existing customers increase their subscription value, thereby increasing MRR.
- Plan Upgrades: Encouraging customers to upgrade to higher-tier plans increases the average revenue per user, positively impacting MRR.
- Annual Billing Conversions: Converting annual billing to monthly recognition can provide a more consistent and predictable MRR, smoothing out revenue fluctuations.

Involved Roles & Activities¶

Involved Roles

These roles are typically responsible for implementing or monitoring this KPI:

Finance
Marketing
Product Marketing (PMM)
Revenue Operations
Sales Manager
Activities

Common initiatives or actions associated with this KPI:

Revenue Management
Retention Strategies
Upsell Programs
Pricing Optimization

Funnel Stage & Type¶

AAARRR Funnel Stage

This KPI is associated with the following stages in the AAARRR (Pirate Metrics) funnel:

Revenue
Type

This KPI is classified as a Lagging Indicator. It reflects the results of past actions or behaviors and is used to validate performance or assess the impact of previous strategies.

Supporting Leading & Lagging Metrics¶

Leading

These leading indicators influence this KPI and act as early signals that forecast future changes in this KPI.
- Activation Rate: Activation Rate measures how many users reach meaningful engagement milestones, acting as a strong early indicator of future MRR growth or decline. Higher activation rates generally forecast increased conversion to paid subscriptions, directly impacting future Monthly Recurring Revenue.
- Product Qualified Leads: Product Qualified Leads (PQLs) signal users/accounts demonstrating high intent and value realization, which often precede new paid conversions. An increase in PQLs is an upstream driver that forecasts future MRR growth as these users convert to paid plans.
- Deal Velocity: Deal Velocity measures how quickly deals move through the pipeline. Faster deal velocity usually results in more closed-won deals within a period, accelerating MRR growth. Slowdowns may signal future stagnation or decline.
- Number of Monthly Sign-ups: The volume of new sign-ups is a direct input into the pool of potential paying customers. A rise in sign-ups, especially when combined with strong activation and conversion rates, predicts future increases in Monthly Recurring Revenue.
- Trial-to-Paid Conversion Rate: This metric quantifies how effectively trial users convert to paid subscriptions. Higher trial-to-paid conversion rates are leading indicators of upcoming MRR growth, while declining rates may foreshadow future MRR softness.
Lagging

These lagging indicators confirm, quantify, or amplify this KPI and help explain the broader business impact on this KPI after the fact.
- Revenue Churn Rate: Revenue Churn Rate quantifies the percentage of recurring revenue lost due to cancellations or downgrades. High revenue churn directly reduces MRR, providing a critical lens on revenue retention and stability after the fact.
- Contract Renewal Rate: This rate measures how many expiring contracts are renewed. A high renewal rate supports sustained or growing MRR, while a declining rate signals potential future MRR contraction. It confirms the health of existing revenue streams.
- Expansion Revenue Growth Rate: This metric captures the rate at which existing customers increase their spending (through upsells/cross-sells), directly contributing to MRR uplift and highlighting the effectiveness of expansion efforts.
- Customer Churn Rate: Customer Churn Rate tracks the loss of paying customers, which, in turn, decreases MRR. It quantifies the outcome of retention efforts and explains fluctuations in recurring revenue post-facto.
- Net Revenue Retention: Net Revenue Retention combines retained, expanded, and lost revenue from existing customers. It validates the net effect of upsells, churn, and downgrades on MRR, providing a holistic post-period view of recurring revenue health.