What is monthly recurring revenue (MRR)?

Written by Madalena Rugeroni, founder of Mazo · Updated 15 September 2026

Monthly recurring revenue (MRR) is the predictable subscription revenue a SaaS company earns each month from all active paying customers, with annual or multi-year contracts converted into a monthly amount and one-time fees excluded. Before €1M ARR it is the main number for tracking growth, because it moves every month.

MRR formula and MRR movements

MRR = sum of the monthly subscription value of every active, paying customer

Net new MRR = new MRR + expansion MRR + reactivation MRR − contraction MRR − churned MRR

New comes from first-time customers; expansion from upgrades and added usage; reactivation from customers who come back; contraction from downgrades; churned from cancellations. An annual €1,200 plan is €100 of MRR every month, not €1,200 in the month it's paid.

Worked example

A fictional SaaS starts March at €10,000 MRR.

New: +€1,500 · Expansion: +€400 · Contraction: −€200 · Churned: −€500
Net new MRR = €1,500 + €400 − €200 − €500 = €1,200
End of March MRR = €11,200, 12% month-over-month growth.

The total looks healthy, but the movements tell more: churn and contraction erased a third of new sales. That leak is worth fixing before buying more leads.

Why MRR matters from €0 to €1M ARR

Pre-revenue: don't count pilots or trials as MRR unless they're paid and recurring. Track commitments instead.
Around €10k MRR: review the MRR movements every month. Is growth coming from new customers, or are you mostly replacing churn?
€50k+ MRR: expansion MRR starts to matter as much as new MRR. It's the engine behind net revenue retention above 100%.

Mazo's rule of thumb: break every month into new, expansion, contraction and churned MRR, and fix the leak before pouring in more leads — acquisition scales whatever retention you already have. Judge growth by the trend in your month-over-month rate, not by one good month.

Common MRR mistakes

Booking an annual plan in one month. It creates a spike, then eleven months of apparent flat growth.
Including one-time fees or free trials. Neither is recurring revenue.
Ignoring discounts. A €200 plan at 50% off is €100 of MRR.
Watching only the total. Flat MRR can hide strong sales and heavy churn cancelling each other out.

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FAQ

What is the difference between MRR and ARR?

MRR is recurring subscription revenue per month; ARR is the same figure annualised, so ARR equals MRR times 12. Early-stage SaaS companies usually run the business on MRR and use ARR when talking to investors.

How do annual plans count toward MRR?

Divide the annual subscription value by 12. A customer paying €2,400 a year adds €200 to MRR each month for the length of the contract.

What is net new MRR?

Net new MRR is the change in MRR over a month: new plus expansion plus reactivation MRR, minus contraction and churned MRR.

Who wrote this

Madalena Rugeroni built Mazo. She's an ex-Googler, a startup advisor and investor, and runs a portfolio of internet companies. Before that, as Head of Growth at Amplemarket, she scaled a B2B SaaS to $10M ARR. LinkedIn

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Further reading. Operators and books referenced: Elena Verna (retention before acquisition). These are published methodologies credited to their authors; Mazo is not affiliated with or endorsed by them.