Monthly Recurring Revenue (MRR) is the single most important revenue metric for any subscription or SaaS business. It represents the total predictable revenue the company expects to receive every month from its active customer base, normalized to a monthly figure.
Calculating MRR
At its simplest: MRR = Number of paying customers × Average revenue per account per month
For companies with multiple pricing tiers, sum the monthly value of every active subscription:
- 100 customers on a $50/month plan = $5,000 MRR
- 25 customers on a $200/month plan = $5,000 MRR
- Total MRR = $10,000
For annual contracts, divide by 12. A customer paying $12,000/year contributes $1,000/month to MRR.
MRR components
Breaking MRR into components reveals growth dynamics:
- New MRR — revenue from newly acquired customers this month
- Expansion MRR — additional revenue from existing customers (upgrades, seat additions)
- Churned MRR — revenue lost from customers who canceled
- Contraction MRR — revenue lost from customers who downgraded
- Net New MRR = New + Expansion - Churned - Contraction
ARR (Annual Recurring Revenue)
ARR = MRR × 12. Investors typically reference ARR for companies above ~$1M MRR and MRR for earlier-stage companies. Both are used, but be consistent.
2026 benchmarks
Milestones investors expect at each stage:
- Pre-seed: $0–$10K MRR (or pre-revenue with strong design partners)
- Seed: $10K–$100K MRR
- Series A: $100K–$250K MRR ($1.2–3M ARR) with 15%+ month-over-month growth
- Series B: $500K–$2M MRR ($6–24M ARR) with strong net revenue retention
Net Revenue Retention (NRR)
The metric that separates good SaaS from great SaaS. NRR measures whether your existing customer base is growing or shrinking, excluding new customers entirely:
- NRR > 120%: exceptional — your existing customers spend 20%+ more each year
- NRR 100–120%: healthy — expansion offsets churn
- NRR < 100%: your bucket is leaking — you must acquire new customers just to stay flat
Common MRR mistakes
- Including one-time revenue — setup fees, consulting, and implementation charges are not recurring
- Counting committed but unbilled ARR — only include signed, active contracts
- Ignoring discounts — MRR should reflect what customers actually pay, not list price