MRR stands for Monthly Recurring Revenue and indicates the average value that a company receives from paying for its usage subscriptions.
Edgar Higuerey
Jul 27, 21 | 7 min read
MRR: A metric that represents monthly profit generation
Reading time: 5 minutes
It can be said that MRR is even more important for companies in the SaaS or Software as a Service world , since it is the number that unites the financial and strategic sectors, defining the future of the company.
Keep reading to discover how to calculate your business’s MRR, its importance for strategic planning, and, of course, some foolproof tips to increase your monthly recurring revenue.
What is MRR?
MRR is the calculation of how much a company will receive monthly for subscriptions to use its products or services . It is through this metric that business leaders can predict monthly earnings and, consequently, plan future investments.
There are managers who believe that MRR is the most
important index for SaaS companies. The justification is that, through this well-done calculation, the software roadmap will be created in the most realistic way possible.
It is worth mentioning that, when madagascar email list 150000 contact leads calculated correctly, MRR will give the company’s growth predictability. Once it is possible to know when contracts with your clients must be renewed, for example. On the other hand, there is also greater control over how much each churn is impacting your Monthly Recurring Revenue .
In short, by calculating the MRR it is possible to monitor the arrival of new customers, contract renewals and churn (subscription cancellation).
As we said, MRR links the financial side with the strategic side of your client. When calculated correctly, MRR is the best way to make forecasts, identify bottlenecks and seasonal behaviors .
How to calculate MRR?
It is common to make mistakes when calculating the MRR by adding up all the contractual values that you are to receive monthly. This could be correct, but before confirming it, you should look at whether there is any variable that may impact that value.
Before showing you in a practical way how to calculate your company’s MRR, we will explain the factors that must be considered when doing the calculation.
Number of monthly subscriptions
To begin calculating MRR, you need to know how many subscriptions there are and the value of each one. This number is the basis of the calculation. In the case of a company that works with plans of different values, it is crucial to identify how many subscriptions there are for each of the different types of contracts.
Expiration of contracts Knowing the total number
of contracts your company has, you need to check the expiration dates of each one of them. The goal is to know how much non-renewed contracts can impact your MRR .
From an operational point of view, the responsible team will then know where to concentrate their efforts in order to renew the contracts.
Non-recurring fees
Don’t forget to consider the values that are not repeated . For example, the hiring of some extra service. In addition, when we talk about SaaS captio, the first expense management platform approved by the tax agency companies, it is common to have implementation fees charged, which must also be considered in the calculation of the MRR.
At this point, it is also important to consider the promotions and negotiations of the monthly payment values that you offer to clients.
Churn MRR
Churn is nothing more than customer turnover. Therefore, it is an extremely important value for calculating your MRR. In the end, when someone cancels their subscription, the monthly payment stops. As a result, you will receive less money at the end by lists of the month on a recurring basis.