Term · Business Model & Operating KPIs
MRR
In briefMRR (Monthly Recurring Revenue) is a company's normalized, monthly recurring subscription revenue excluding one-off revenue. It is the monthly counterpart to ARR (ARR = MRR × 12) and serves as an operating metric for tracking growth, new customers and cancellations in the subscription business.
Definition
MRR (Monthly Recurring Revenue) is the normalized, contractually recurring revenue of a subscription business per month. One-off payments and project-based revenue do not count toward it. MRR is the monthly equivalent of the annual ARR and serves as an operating management metric, not as accounting revenue.
How it is calculated
Formula. MRR = Sum of monthly recurring subscription revenues; ARR = MRR × 12
Why it matters for small caps
For small software and subscription companies, the trend in MRR shows early on whether the business is growing or shrinking organically. It reacts faster to new customers and cancellations than the annual financial statements.
Common misreadings
- MRR is frequently equated with reported monthly revenue, even though it excludes one-off revenue and non-recurring items.
In the process
Frequently asked
How does MRR differ from ARR?
MRR measures recurring revenue per month, ARR per year. As an approximation, ARR = MRR × 12. MRR is suited to short-term management, ARR to the annual view.
Does a one-time setup fee count toward MRR?
No. One-off or project-based revenue is not recurring and does not belong in MRR. It is reported separately so as not to distort the picture.
Is MRR an accounting metric?
No. MRR is an operating management metric with no uniform statutory definition. Accounting revenue is determined under accounting standards and can differ from the MRR extrapolation.
Related terms
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.