How to calculate MRR and ARR

What MRR is

Monthly recurring revenue (MRR) is the amount of subscription revenue you can expect to collect in a typical month from the customers you have right now. It ignores timing: a customer who pays $90 once a year still contributes $7.50 to MRR every month. That is what makes MRR useful. Cash arrives in lumps, but MRR moves smoothly enough that you can see whether a product is growing.

MRR is not the same as revenue in your bank account this month, and it is not accounting revenue either. It is an operating metric. Your accountant may recognise revenue differently, and that is fine; the two answer different questions.

The formula

For a single product, the short version is:

MRR = sum over active subscriptions of (recurring price after discounts ÷ months in billing period)

If everyone pays monthly at the same price, that collapses to customers × price. In practice you will have a mix of monthly and annual plans, a few coupons and maybe a grandfathered price or two, so it pays to be explicit about each rule below.

What counts and what doesn't

Include

• Active paid subscriptions, normalised to a month: quarterly ÷ 3, annual ÷ 12.
• Recurring add-ons and per-seat charges at their current quantity.
• Ongoing discounts at the discounted price. A 20%-off-forever coupon means 80% of list price counts.
• Subscriptions in a short payment-retry period, if you expect most of them to recover. Be consistent.

Leave out

• One-off charges: setup fees, lifetime deals, consulting, one-time credit packs.
• Free trials and free plans, until the first payment.
• Sales tax and VAT. They are not your revenue.
• Usage-based overages that vary a lot month to month. Track them separately, or use a trailing average and label it.

Worked example

A small product with two plans and a few annual customers, at the end of the month:

Annual customers count for $90 ÷ 12 = $7.50 each. The discounted Pro plan counts at $29 × 0.8 = $23.20 each. The setup fees were real money, but they will not repeat, so they stay out.

MRR movements

A single MRR number tells you where you are. The change between two months tells you why. Split that change into four parts:

If net change is flat, the movements show whether that is a quiet month or a busy one where churn ate all your new sales. Those need very different fixes. The metrics glossary defines churn and net revenue retention, which build on these movements.

ARR

Annual recurring revenue is the yearly version of the same run rate:

ARR = MRR × 12

In the example, ARR is $551 × 12 = $6,612. ARR is not a forecast of next year's revenue (churn and growth will change it) and it is not last year's revenue. Small products usually talk in MRR because it moves visibly from month to month; ARR is more common once annual contracts dominate or when talking to buyers and investors.

Several products

If you run more than one product, calculate MRR for each and then add them up. The total is good for a headline, but it hides the story: one product growing 10% a month can mask another slowly bleeding. Keep the per-product numbers side by side, along with what each one costs to run, so you can see margin and not just revenue. The guide to tracking finances across several SaaS projects walks through a simple setup.

In SaaSMon, each product is a project. Log revenue per project (or set recurring rules for stable amounts). The KPI report shows MRR, ARR, churn and profit margin, and the portfolio overview (Pro) puts every project side by side. There is no billing-provider sync yet, so revenue goes in by hand, by recurring rule, or by CSV import on Pro.