MRR definition: monthly recurring revenue — the subscription revenue a business earns every month, normalized to monthly value.
MRR is the money your business earns every month from subscriptions, before anything one-time or unpredictable. It is the single most useful revenue number a founder can track, because unlike total revenue it tells you what next month already looks like.
A company with €10,000 in one-off project income starts every month at zero. A company with €10,000 in MRR starts every month at €10,000. That difference is why investors, and your own planning, treat the two so differently.
The formula
MRR = sum of all active subscriptions, normalized to one month
"Normalized" is the word that matters. A customer paying €1,200 per year is €100 of MRR, not €1,200 in the month they pay. A customer on a €50 quarterly plan is €16.67 of MRR. You spread every contract across the months it covers, so the number describes a steady state instead of a lumpy bank balance.
What counts, and what does not
| Counts toward MRR | Does not count |
|---|---|
| Monthly subscription fees | One-time setup or onboarding fees |
| Annual contracts divided by 12 | Consulting and custom projects |
| Recurring add-ons and extra seats | Usage spikes billed once |
| Discounted price actually paid | The list price nobody pays |
| Free trials, until they convert |
The discipline is the point. The moment one-off income sneaks in, MRR stops predicting anything and becomes a vanity number.
The four movements inside MRR
Month over month, MRR only changes in four ways:
New MRR. Brand-new customers signing up.
Expansion MRR. Existing customers paying more: upgrades, extra seats, add-ons.
Contraction MRR. Existing customers paying less: downgrades, removed seats.
Churned MRR. Customers cancelling entirely.
net new MRR = new + expansion - contraction - churned
Reading the four movements separately is where the diagnosis lives. Flat new MRR is an acquisition problem. Rising contraction is a pricing or value problem. Rising churn is a retention problem. One headline number, three different fixes.
A worked example
Say April looks like this:
| Movement | Amount |
|---|---|
| Starting MRR | €8,000 |
| New customers | +€900 |
| Upgrades | +€300 |
| Downgrades | -€150 |
| Cancellations | -€450 |
| Ending MRR | €8,600 |
Net new MRR is +€600, a 7.5% monthly growth rate. Just as important: churn took €450, meaning existing revenue is leaking at about 5.6% per month. Growth is masking a retention problem that will get expensive at scale. You only see that by tracking the movements, not the total.
Why founders track it weekly
MRR is the revenue half of the two numbers that decide your company's future; burn rate is the other. Together they set your runway and answer whether you are default alive or default dead. A single big customer inside your MRR also deserves watching, because one customer being too big turns recurring revenue into conditional revenue. Multiplied by twelve, MRR becomes ARR, the version investors quote; MRR vs ARR covers when to use which.
If you want the number without the spreadsheet: try the free MRR calculator, and if you would rather it stayed current on its own, that is exactly what Plainhub does as you record what happens.
MRR is not the whole truth about a business. But it is the closest thing revenue has to a heartbeat: measured monthly, moved by four muscles, and the first thing anyone serious will ask about.