What is MRR? Monthly Recurring Revenue Explained

If you're building a SaaS or subscription business, MRR is the single most important number you need to track. But what exactly is it, and why does it matter so much?

What is MRR?

MRR (Monthly Recurring Revenue) is the predictable, recurring revenue your business generates every month from subscriptions or recurring charges.

Unlike one-time sales, MRR represents money you can expect to receive month after month—as long as your customers stick around.

How to Calculate MRR

The basic formula is simple:

MRR = Number of Customers × Average Revenue Per Customer

For example:

• 100 customers paying $50/month = $5,000 MRR
• 25 customers paying $200/month = $5,000 MRR

MRR Components

Your total MRR is actually made up of several components:

| Component | Description | | ------------------- | ----------------------------------------------------- | | New MRR | Revenue from new customers this month | | Expansion MRR | Additional revenue from existing customers (upgrades) | | Contraction MRR | Lost revenue from downgrades | | Churned MRR | Lost revenue from cancelled subscriptions |

Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR

Why MRR Matters

1. Predictability

Unlike one-time sales, MRR gives you predictable income. You know roughly how much money is coming in next month.

2. Valuation

SaaS companies are typically valued as a multiple of their ARR (Annual Recurring Revenue = MRR × 12). Higher MRR = higher company value.

3. Growth Tracking

MRR is the clearest indicator of whether your business is growing or shrinking.

4. Investor Metric

If you ever raise funding, investors will ask about your MRR first.

MRR Milestones Worth Celebrating

Every MRR milestone represents progress. Here are the key ones:

| Milestone | What It Means | | --------------- | ----------------------------------------------------------- | | $100 MRR | First recurring revenue - you have a product people pay for | | $1,000 MRR | You're past the "friends and family" stage | | $5,000 MRR | Could replace a part-time income | | $10,000 MRR | Full-time income potential | | $50,000 MRR | Hire your first employee | | $83,333 MRR | $1M ARR - you're a real company |

Common MRR Mistakes

Counting One-Time Revenue

MRR is only recurring revenue. Don't include:

• Setup fees
• One-time purchases
• Consulting revenue

Ignoring Annual Plans

If someone pays $1,200 upfront for a yearly plan:

• MRR = $1,200 ÷ 12 = $100/month
• Not $1,200 in the month they paid

Not Tracking Components

Knowing your total MRR isn't enough. Track New, Expansion, Contraction, and Churn separately.

MRR vs ARR

ARR (Annual Recurring Revenue) is simply:

ARR = MRR × 12

ARR is often used for larger SaaS companies and for valuation purposes. The terms are interchangeable in meaning—just different time periods.

Tools to Track MRR

If you're using Stripe, LemonSqueezy, or Paddle, you can:

• Use their built-in dashboards
• Connect to analytics tools like Baremetrics or ProfitWell
• Connect to HackerBadges to track milestones and generate verified badges

Celebrate Your MRR Milestones

Every MRR milestone is an achievement worth celebrating. With HackerBadges, you can:

1. Connect your Stripe or LemonSqueezy account
2. Set your milestone goals ($1K, $5K, $10K+)
3. Automatically generate verified badges when you hit them
4. Share your achievements with the world

Track Your MRR Milestones →

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