How to calculate MRR
To calculate MRR, add up the normalised monthly value of every active subscription. Monthly plans count at their monthly price; annual and multi-year plans count at their price divided by the number of months they cover. One-time fees, setup charges and usage overages that do not recur are left out.
| Line | Customers | Monthly price | MRR |
|---|---|---|---|
| Starter (monthly) | 100 | $29.00 | $2,900 |
| Pro (monthly) | 40 | $99.00 | $3,960 |
| Pro (annual, $1,188) | 12 | $99.00 | $1,188 |
| Recurring discounts | −$200 | ||
| MRR | 152 | $7,848 |
- MRR$7,848
- ARR$94,176
- ARPA$51.63
MRR and ARR
ARR is annualised recurring revenue: MRR × 12, or the annual value of subscription contracts. Public companies define it in their filings; Amplitude, for example, defines ARR as the annual recurring revenue of subscription agreements.[1] Because the definition belongs to each company, state yours. The ARR formula page builds an ARR bridge from new, expansion, contraction and churn.
MRR movements
MRR changes for four reasons: new customers, expansion (upgrades), contraction (downgrades) and churn. Ending MRR = starting MRR + new + expansion − contraction − churn. Tracking them separately shows whether growth comes from new sales or from existing customers; revenue retention metrics such as net dollar retention come from the expansion, contraction and churn lines.[2] Keep the churn line low by looking after existing customers,[3] and measure it with the churn rate calculator.
MRR mistakes
- Booking annual payments as one month’s MRR. A $1,188 annual payment is $99 of MRR, not $1,188.
- Counting trials and one-off fees. Free trials have no recurring revenue yet; setup fees do not recur.
- Ignoring discounts. A 20% lifetime discount reduces MRR every month; a one-month promotion only that month.
With ARPA in hand, the customer lifetime value calculator turns MRR per customer and churn into lifetime value, and the CAC calculator tells you how many months of it a new customer costs.
Frequently asked questions
How do you calculate monthly recurring revenue?
Customers × monthly price for each plan, plus annual plans ÷ 12, minus recurring discounts.
How do I convert MRR to ARR?
Multiply by 12. $7,848 MRR × 12 = $94,176 ARR.
Is MRR the same as monthly revenue?
No. Monthly revenue includes one-time charges and usage; MRR counts only the recurring, normalised subscription value.
What is ARPA?
Average revenue per account: MRR ÷ paying customers.