// glossary

What is MRR?

Monthly Recurring Revenue

MRR (Monthly Recurring Revenue) is the total subscription revenue recurring monthly. The single number that summarizes a SaaS or subscription business's health. One-time fees, setup charges and consulting revenue are excluded — only the recurring portion counts.

// formula

MRR = Active Customers × Average Monthly Subscription

250 customers × $96/mo = $24,000 MRR. Annual plans get amortized: a $1,152/yr plan counts as $96/mo MRR.

// MRR movement

New MRR — revenue from customers acquired this month.
Expansion MRR — upgrades / seat additions from existing customers.
Reactivation MRR — returning past customers.
Contraction MRR — downgrades / seat reductions (negative).
Churn MRR — cancellations (negative).

// Net New MRR

Net New MRR = New + Expansion + Reactivation − Contraction − Churn

Healthy SaaS keeps this positive and growing. Negative Net New = the business is shrinking; high New MRR can't save you if churn outpaces it.

// Quick Ratio

Quick Ratio = (New + Expansion) / (Contraction + Churn). Investor-favorite:

<1: losing.
1-2: hard mode.
2-4: healthy SaaS.
>4: aggressive growth phase.

// MRR vs ARR

ARR (Annual Recurring Revenue) = MRR × 12. Same number; ARR shows up in board / investor decks because "$10M ARR" reads stronger than "$833K MRR."

Example: A B2B SaaS started Feb at $96K MRR. The month: New $7,600 + Expansion $2,400 + Reactivation $800 − Contraction $1,200 − Churn $4,400 = +$5,200 Net New. End-of-Feb MRR $101,200. Quick Ratio = 10,800/5,600 = 1.93 — healthy borderline; pushing expansion can lift it past 2.5.