- What is MRR and why does it matter?
- Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue from active subscriptions. It is the primary health metric for subscription businesses because it strips out one-time payments and shows the true underlying revenue trajectory.
- How is ARR calculated from MRR?
- ARR = MRR x 12. This assumes current MRR holds constant for the next 12 months, which is a snapshot metric. ARR is used for investor reporting, valuation (SaaS companies are often valued at a multiple of ARR), and internal goal-setting.
- What is ARPU and how is it used?
- Average Revenue Per User (ARPU) = MRR / total active customers. It benchmarks pricing efficiency and informs expansion revenue strategy. Rising ARPU over time typically signals successful upselling; declining ARPU may indicate a shift toward lower-tier plans.
- Should I include one-time fees in MRR?
- No. MRR should only include recurring subscription revenue. One-time setup fees, professional services, and usage overages are typically excluded or normalized separately. Including them inflates MRR and distorts month-over-month growth trends.
