What is Monthly Recurring Revenue (MRR)?
Monthly Recurring Revenue (MRR) is a financial metric that represents the predictable and recurring revenue a company expects to receive each month from its subscription-based customers. MRR is crucial for understanding the stability and growth potential of a business, particularly in the SaaS and subscription industries.
How to Measure Monthly Recurring Revenue (MRR)?
MRR is measured by:
Subscription Revenue: Calculate the total revenue generated from subscription services during a specific month.
New MRR: Add revenue from new customers acquired during the month.
Expansion MRR: Include additional revenue from existing customers who have upgraded or purchased add-ons.
MRR Calculation: Sum the subscription, new, and expansion MRR, and adjust for any downgrades or cancellations to get the net MRR for the month.
How to Increase Monthly Recurring Revenue (MRR)?
To increase MRR:
Acquire New Customers: Focus on attracting more customers to increase the base of recurring revenue.
Upsell and Cross-Sell: Encourage existing customers to upgrade their plans or purchase additional services to boost MRR.
Reduce Churn: Implement strategies to retain customers and minimize cancellations, thereby maintaining or growing MRR.
Introduce New Pricing Tiers: Offer new pricing tiers or add-on services that provide additional value and generate higher recurring revenue.