In a subscription business, a single month's billing says very little on its own. What is MRR is the question that really matters: how much recurring and predictable revenue does the company generate each month, excluding one-off payments that will not recur.

The problem arises when MRR is mixed with one-time revenue, such as a separately billed implementation or an annual contract paid upfront. This mix inflates the figure for one month and deflates it the next, without the business actually having changed.

In this guide, we explain what MRR is, how to calculate it step-by-step, and what MRR vs ARR is—the comparison that most confuses founders and sales teams when preparing a report for investors or board members.

What is MRR and Why is it the Core Metric of B2B SaaS

MRR (monthly recurring revenue) is the predictable revenue a subscription business expects to receive each month, calculated solely from active, recurring contracts. It does not include one-time payments, setup fees, or revenues that will not recur the following month.

It is the core metric for B2B SaaS because it summarizes, in a single number, the health of the business month-over-month: if MRR is growing steadily, the business is working; if it stagnates or declines, there is an issue that no other isolated metric shows as quickly.

How to Calculate MRR Step-by-Step

• 1. List all active contracts for the month. Only clients who are currently paying, not prospects or canceled contracts.

• 2. Normalize each contract to its monthly value. An annual contract of 1,200 euros becomes 100 euros of MRR, not 1,200 all at once.

• 3. Sum the monthly value of all contracts. The result is the total MRR for the month.

• 4. Exclude one-off payments. Setup fees, implementation services, or one-time consulting are not part of MRR, even if they were collected that month.

The most common error in this calculation is the second step: treating an annual contract as if its entire value belonged to the month in which it was collected, instead of spreading it over the twelve months it actually covers.

MRR vs ARR: When to Use Each

ARR (annual recurring revenue) is simply MRR multiplied by 12. The difference is not in the calculation, but in how each is used.

MRR is the operational metric: it serves to monitor trends month-over-month, spot issues quickly, and make short-term decisions. ARR is the communication metric: it is used to speak with investors, compare the business size with other companies, or project annual revenues in a business plan.

Using ARR for day-to-day operational decisions often hides problems that monthly MRR would reveal immediately, such as a temporary drop that is not yet noticeable at the annual level.

Types of MRR (New, Expansion, Contraction, Churn)

• New MRR. The revenue generated by clients who signed a contract for the first time that month.

• Expansion MRR. The increase in revenue from existing clients who purchased more seats, a higher plan, or additional features.

• Contraction MRR. The drop in revenue from clients who downgraded their plan or reduced their usage, without canceling completely.

• MRR Lost to Churn. The revenue lost when a client completely cancels their subscription.

Breaking down MRR into these four types is what actually explains where growth (or decline) comes from month-over-month, something that the total MRR figure alone does not show.

Common Errors When Calculating MRR

• Including one-off payments in MRR. This inflates the figure for a specific month and creates an artificial drop the next.

• Not accounting for temporary discounts. A client with a 50% discount for 3 months does not contribute the full list price value to the MRR during that period.

• Mixing different currencies without consistent conversion. In companies with international clients, this can distort the figure month-over-month depending on the exchange rate.

• Not separating MRR by type. Looking only at the total hides whether growth is coming from new clients, expansion, or simply because churn decreased that month.

SalesDose: How We Connect MRR with the Sales Process

An MRR that grows solely by acquiring new clients, without account expansion, is usually a sign that the sales process is not leveraging the existing client base.

At SalesDose, the sales consulting team reviews the complete breakdown of MRR (new, expansion, contraction, and churn) to identify at which stage of the sales process recurring revenue is being lost or gained, and through client acquisition, we ensure that new MRR does not rely on a single channel.

If your MRR is growing every month but you are not entirely sure why, talk to our team.

Frequently Asked Questions About What MRR Is

These are the most common questions from founders and B2B sales teams when working with MRR.

Does MRR include taxes?

No. MRR is calculated on the net contract value, excluding VAT or other taxes that the company collects but does not retain.

What is MRR vs ARR in simple terms?

MRR is the recurring revenue for a single month; ARR is that same revenue projected over a full year, by multiplying the MRR by 12. One does not replace the other; they are used for different purposes.

How is MRR calculated with annual plans?

By dividing the total annual contract value by 12 and adding that monthly value to the MRR of the corresponding month, instead of counting all the revenue in the month it was collected.

What is an acceptable MRR churn?

It depends on the customer segment, but in B2B SaaS, a monthly MRR churn below 2% is typically considered healthy. Anything above 5% monthly usually indicates a serious retention problem.

Is MRR useful for non-SaaS companies?

It is useful for any business with recurring revenue from subscriptions or ongoing contracts, not just software: consulting with a monthly retainer, managed services, or memberships can also be measured with MRR.

Calculating MRR correctly is the first step. The second, and more important, is breaking it down by type to understand if the growth is solid or relies on a single channel that could dry up at any moment.

Do you know if your MRR is growing through account expansion or only through new customers? Let's review it together →