# Monthly recurring revenue (MRR)

> Monthly recurring revenue (MRR) is the subscription revenue a business can expect every month, with annual plans counted as one twelfth per month. Annual recurring revenue (ARR) is the same number for a year: MRR × 12.

Canonical: https://abacklaunch.com/glossary/mrr

Also called MRR, ARR, annual recurring revenue, monthly recurring revenue, MRR and ARR.

## What counts and what does not

MRR counts only revenue that repeats: monthly subscriptions at their monthly price, and annual or quarterly plans spread evenly over their months. A customer who pays $240 for a year adds $20 to MRR, not $240 in the month they paid. One-time fees, setup charges, consulting work and usage you cannot expect to repeat stay out.

Discounts count at the price the customer actually pays. Free trials count at zero until the trial converts. Mixing cash received with recurring revenue is the most common mistake, and it makes a month of annual sign-ups look like a jump in growth that is not there.

## The parts of MRR growth

Founders usually split the change in MRR into five parts. New MRR comes from new customers. Expansion MRR comes from upgrades and extra seats. Reactivation MRR comes from customers who left and came back. Contraction MRR is lost to downgrades, and churned MRR is lost to cancellations.

Net new MRR is new plus expansion plus reactivation, minus contraction and churned. Watching the parts tells you more than the total: steady new MRR with rising churned MRR means the product is leaking customers as fast as it wins them.

## MRR or ARR?

They measure the same thing. Early products with monthly plans usually talk in MRR, because it moves visibly from month to month. Companies selling annual contracts, and most investors once revenue passes about $1 million a year, talk in ARR. Use one consistently in your own reports so the numbers compare.

## Example

A tool has 120 customers on a $29 monthly plan and 10 on a $290 annual plan. MRR is 120 × $29 = $3,480, plus 10 × $290 ÷ 12 = $241.67, so $3,721.67 in total, about $3,722. ARR is $3,721.67 × 12, about $44,660. If next month brings $400 of new MRR and $150 of churned MRR, net new MRR is $250.

## Questions

### Is MRR the same as monthly revenue?

No. Monthly revenue is what you collected in the month, including one-time fees and full annual payments. MRR is the recurring part only, with annual plans spread across twelve months.

### How do I calculate ARR from MRR?

Multiply MRR by 12. A business with $5,000 MRR has $60,000 ARR.

### Should a lifetime deal count towards MRR?

No. A lifetime deal is a single payment that will not repeat, so it is one-time revenue, however large.

## Related

- [Churn rate](https://abacklaunch.com/glossary/churn-rate)
- [Customer lifetime value (LTV)](https://abacklaunch.com/glossary/customer-lifetime-value)
- [Bootstrapping](https://abacklaunch.com/glossary/bootstrapping)
- [Lifetime deal](https://abacklaunch.com/glossary/lifetime-deal)
- [Product-market fit](https://abacklaunch.com/glossary/product-market-fit)
- [Startup idea validator](https://abacklaunch.com/tools/startup-validation)
- [Launch checklist](https://abacklaunch.com/tools/launch-checklist)