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.