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How do you calculate Monthly Recurring Revenue (MRR) for SaaS companies?

MRR helps SaaS companies understand the stability and growth of their revenue stream.

Monthly Recurring Revenue (MRR) is the total predictable, recurring revenue a business expects to receive each month from active subscriptions. MRR is calculated by multiplying the number of paying customers by the Average Revenue Per User (ARPU). Originally popularised by SaaS (Software as a Service) companies, MRR is now a critical metric for any subscription-based business, providing visibility into revenue stability and growth.

 

While the formula below covers the most common scenario, note that annual or multi-year subscribers should have their contract value divided by the subscription period in months before being included in the ARPU calculation.

To calculate MRR for a SaaS company, you will need to know the following:

  1. Number of paying customers: This is the total number of customers who are currently paying for the company's product or service.

  2. Average revenue per user (ARPU): The average amount each customer pays per month.

 

Once you have these numbers, you can use the following formula to calculate MRR:

MRR = Number of paying customers * ARPU

For example, if a SaaS company has 100 paying customers and an ARPU of $100, their MRR would be:

MRR = 100 * $100 = $10,000

This means that the company can expect to receive $10,000 in recurring revenue each month.

MRR fluctuates with changes in paying customer count and ARPU. Tracking both metrics over time reveals meaningful trends and supports data-driven decisions.

 

Beyond the basic formula, SaaS businesses commonly break MRR down into components: New MRR (revenue from new customers), Expansion MRR (upgrades or upsells), Churned MRR (revenue lost from cancellations), and Net New MRR (New MRR + Expansion MRR − Churned MRR). Monitoring these segments gives a fuller picture of revenue health.

Explore more SaaS growth resources at BIAS Digital