The subscription business is all about managing customer relationships and providing recurring value. A key metric in this business is the monthly recurring revenue or MRR.
Your MRR is the total amount of revenue that you receive on a monthly basis from your subscribers. This number is important to track because it gives you a clear picture of your business’s growth month-over-month. To calculate your MRR, simply add up the amount that each of your subscribers pays per month.
MRR is calculated as the sum of all recurring revenues from subscriptions in a given month, taking into account any changes such as new subscriptions, cancellations, upgrades, or downgrades.
The formula for calculating MRR is typically:
MRR = (Number of subscribers * Average Revenue per Subscriber) + Upgrades – Downgrades + New Subscriptions – Cancellations
Where:
The number of subscribers is the total number of active subscribers in a given month.
Average Revenue per Subscriber is the average amount of revenue generated by each subscriber per month.
Upgrades, Downgrades, New Subscriptions, and Cancellations represent any changes in the number of subscribers and the revenue generated by each subscriber during the month.
Monitoring your company’s MRR is essential to understanding the health of your business and making informed decisions about future growth. By keeping track of this key metric, you can ensure that your business is on the right track for long-term success.
