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How do we calculate your MRR?

Monthly Recurring Revenue, commonly known as MRR, is a way of measuring predictable revenue streams from your subscriptions. It tells you, at any given point of time, how much recurring revenue your business can expect to earn in a month.

We take the revenue generated from all of your customers and convert it into a monthly format. Each time a new customer subscribes they will be added to the cumulative total. In addition to the new recurring revenue, we also consider

  • MRR Churn - If a customer churns their monthly revenue will be deducted from your MRR.
  • MRR Expansion - If a customer upgrades, changes plan, or has their monthly bill increased, the difference will be added to your MRR.
  • MRR Contraction - If a customer downgrades, changes plan, or has their monthly bill decreased, the difference will be subtracted from your MRR.
  • In addition to above, following items are also considered in calculating the MRR:
    • Discounts and coupons applied
    • Tax and Paddle’s fees
    • Any foreign-currency subscriptions are converted into your primary currency at current exchange rates.

We do not consider following items in calculating your MRR:

  • One-time payments and metered charges
  • Free trials

MRR for the day is calculated at 6am UTC everyday.

What does the MRR calculation look like?

The most important thing to note about MRR, is that the billed value of all subscriptions - whether you’re selling on daily, weekly, monthly or annual billing cycles - is converted into their monthly equivalent. We do this in the following way:

  • If the subscription is billed daily - we divide the invoice charge by the plan length and multiply by 30.
  • If the subscriptions is billed weekly - we divide the invoice charge by the plan length and multiply by 4.33.
  • If the subscription is billed monthly - we divide the invoice charge by the plan length.
  • If the subscription is billed annually - we divide the invoice charge by the plan length and divide by 12.

Obviously, for monthly subscriptions, we use the actual value charged, as there is no need to convert this further.

What should I be looking for in my MRR?

Subscription businesses generally treat MRR as one of their key KPIs, and as an excellent indicator of business health. It’s a great metric to prompt questions, and identify plans, products or customer cohorts which may need a little more attention in order to keep them happy and growing.

Some of the main questions which are answered by MRR include:

  • How much revenue can I expect to make every month?
  • Is my subscription business growing?

If you have questions about MRR, or would like to know more about getting the most from your subscriptions, get in touch with our team.

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