What Is MRR?

How to Calculate MRR

The basic MRR calculation sums the monthly value of every active subscription:

MRR = Sum of (monthly subscription value) for all active customers

For annual contracts, divide the annual value by 12. A customer paying $12,000 per year contributes $1,000 to MRR. A customer on a $200/month plan contributes $200. MRR includes only recurring revenue — one-time fees like setup charges or professional services are excluded.

MRR Components: New, Expansion, Contraction, and Churned

MRR movement breaks down into four components that explain how revenue changes month over month:

• New MRR — revenue from customers acquired during the month
• Expansion MRR — additional revenue from existing customers who upgraded or added seats
• Contraction MRR — revenue lost when existing customers downgrade their plans
• Churned MRR — revenue lost from customers who cancelled entirely

Net new MRR = New MRR + Expansion MRR − Contraction MRR − Churned MRR. A company can grow MRR even without acquiring new customers if expansion revenue outpaces churn — a sign of strong net revenue retention.

MRR vs ARR: When to Use Each

MRR and ARR (Annual Recurring Revenue) measure the same thing at different time scales. ARR = MRR × 12.

MRR is more useful for tracking month-over-month trends, seasonal patterns, and short-term growth velocity. ARR is more common in investor reporting, valuations, and benchmarking against other SaaS companies. Early-stage companies and those with monthly contracts tend to focus on MRR. Enterprise SaaS companies with multi-year contracts tend to report ARR.

Neither metric is inherently better. They answer the same question — “how much predictable revenue does this business generate?” — at a resolution that matches how the company operates and reports.

How BOFU Content Drives MRR Growth

New MRR comes from acquiring customers. The cost-efficiency of that acquisition determines how much growth the business can sustain. BOFU content contributes to MRR growth by converting high-intent organic traffic into customers at a lower CAC than paid channels.

A comparison page that ranks for “[Product A] vs [Product B]” generates qualified signups month after month without incremental ad spend. Each conversion adds to new MRR, and because the acquisition channel is organic, the economics improve as the content ages and the per-customer cost approaches zero.