MRR Calculator

How to use the MRR calculator

1. Paying customers at the start of the month: count customers on a recurring plan. Leave out free users and people still on a trial.
2. Average monthly price per customer: total recurring revenue divided by paying customers. If a customer pays yearly, divide their yearly price by 12 first.
3. New MRR this month: the monthly revenue from customers who started paying this month.
4. Expansion MRR: extra monthly revenue from existing customers who upgraded, added seats or bought an add-on.
5. Contraction MRR: monthly revenue you lost because existing customers moved to a smaller plan.
6. Churned MRR: monthly revenue you lost because customers cancelled.

If you only want today's MRR, fill in the first two fields and set the other four to 0. The result updates as you type.

The MRR formula

These are the standard definitions of monthly recurring revenue and its four movements. Annual recurring revenue (ARR) here is simply this month's MRR multiplied by 12. It is a run rate, which means it shows what a year would look like if nothing changed, not a forecast.

A worked example

Say you sell a scheduling tool to small studios. You start the month with 120 paying customers at an average of $50 a month. During the month, new customers add $900 of monthly revenue, upgrades add $300, downgrades remove $100 and cancellations remove $350.

Look at where the growth came from. You added $1,200 through new customers and upgrades, but lost $450 to downgrades and cancellations, so more than a third of the gain leaked away. If cancellations had been $150 instead of $350, net new MRR would be $950, ending MRR $6,950 and growth 15.8%.

How to read your MRR

The total matters less than the four movements behind it. Two companies can both grow MRR by the same amount in a month while one of them is losing customers almost as quickly as it wins them.

• New MRR shows whether your marketing and sales are working. If it is flat, look at which channel your last customers came from and whether it can bring more.
• Expansion MRR shows whether existing customers get more value over time. It is usually cheaper to earn than new MRR, because you have already paid to win those customers.
• Contraction MRR often points to a pricing problem: customers are paying for more than they use.
• Churned MRR shows whether people keep finding the product worth paying for. Use the churn rate calculator to turn it into a rate you can track.

MRR also feeds your other numbers. Compare it with your monthly spending in the startup runway calculator to see how long your cash lasts, and track the trend with the revenue growth rate calculator.

MRR before you have customers

You can use the same formula to plan a subscription business that does not exist yet. Enter the number of customers you think you can win in your first year and the price you plan to charge, and you get a target MRR. Then test both guesses. Ask real potential customers whether they have the problem and what they pay to solve it today, as described in how to validate a startup idea.

A revenue target like this belongs in the financial chapter of your plan. Fonda's business plan generator builds a 10-chapter plan with sources, and the SaaS business plan template shows what to include if you are writing it yourself.

What the calculator leaves out

• One-off revenue. Setup fees, consulting, hardware and other single payments are not recurring, so they do not belong in MRR.
• Reactivation MRR. Some teams track customers who cancelled and came back as a fifth movement. Here, count them as new MRR.
• Cash timing. A customer who pays $600 for a year adds $50 to MRR, even though the full $600 reaches your bank account now. MRR is not cash flow.
• Costs. MRR is revenue, not profit. It says nothing about what it costs to serve or win those customers.
• Accounting rules. MRR is a management metric, not an official accounting figure. Ask an accountant how to report revenue in your accounts and tax filings, because the rules differ by country.
• Discounts and currencies. Enter prices after discounts, in one currency.