November 30, 20249 min read

MRR Tracking: The Complete Guide for SaaS Founders

Everything you need to know about tracking Monthly Recurring Revenue. Learn MRR calculations, components, tools, and best practices for SaaS businesses.

MRRSaaS metricsrevenue trackingsubscription analyticsARR

What is MRR and Why It Matters

Monthly Recurring Revenue (MRR) is the predictable revenue your SaaS business generates each month from active subscriptions. It's the most important metric for subscription businesses because it:

  • Shows your current revenue run rate
  • Helps predict future cash flow
  • Indicates business health and growth
  • Is the basis for SaaS valuations (typically 5-15x ARR)
  • How to Calculate MRR

    Basic MRR Formula

    MRR = Number of Customers × Average Revenue Per Account (ARPA)

    Or more precisely:

    MRR = Sum of all active monthly subscription values

    MRR Components

    Understanding MRR components helps you identify what's driving growth or decline:

    | Component | Description | Formula |

    |-----------|-------------|---------|

    | New MRR | Revenue from new customers | Sum of new subscriptions |

    | Expansion MRR | Revenue from upgrades | Current MRR - Previous MRR (existing) |

    | Contraction MRR | Revenue lost to downgrades | Previous MRR - Current MRR (existing) |

    | Churned MRR | Revenue lost to cancellations | Sum of cancelled subscriptions |

    | Net New MRR | Total MRR change | New + Expansion - Contraction - Churned |

    Annual Contract Normalization

    For annual subscriptions, normalize to monthly:

    Monthly Value = Annual Contract Value ÷ 12

    MRR Tracking Best Practices

    1. Track MRR Daily

    Don't wait for month-end. Daily tracking helps you:

  • Spot problems early
  • Understand patterns
  • Make faster decisions
  • 2. Segment Your MRR

    Break down MRR by:

  • Customer segment (SMB, Mid-market, Enterprise)
  • Pricing plan
  • Acquisition channel
  • Geography
  • Cohort
  • 3. Monitor MRR Components Separately

    A flat MRR line can hide:

  • Strong new sales offset by high churn
  • Low new sales but strong expansion
  • 4. Use Automated Tools

    Manual spreadsheet tracking leads to:

  • Errors in calculation
  • Delayed insights
  • Inconsistent definitions
  • Common MRR Mistakes to Avoid

    Mistake 1: Including One-Time Revenue

    MRR should only include recurring revenue. Exclude:

  • Implementation fees
  • One-time add-ons
  • Professional services
  • Mistake 2: Not Recognizing Revenue Correctly

    For annual prepaid contracts:

  • ❌ Counting full amount in month received
  • ✓ Spreading across 12 months
  • Mistake 3: Ignoring Downgrades

    Contraction MRR is just as important as churn. Track:

  • Plan downgrades
  • Seat reductions
  • Add-on removals
  • MRR Benchmarks by Stage

    | Stage | Good MRR Growth | Great MRR Growth |

    |---|---|---|

    | Pre-seed | 15%+ monthly | 20%+ monthly |

    | Seed | 10%+ monthly | 15%+ monthly |

    | Series A | 8%+ monthly | 12%+ monthly |

    | Series B+ | 5%+ monthly | 8%+ monthly |

    Tools for MRR Tracking

    Basic (Free)

  • Stripe Dashboard
  • Spreadsheets with Stripe exports
  • Intermediate ($50-200/mo)

  • ChartMogul
  • Baremetrics
  • ProfitWell
  • Advanced (Enterprise)

  • OLARI (AI-powered insights)
  • Zuora
  • Custom data warehouse
  • Getting Started

    1. **Audit your current MRR calculation** — Is it accurate?

    2. **Identify your MRR components** — What's driving growth?

    3. **Set up automated tracking** — Stop using spreadsheets

    4. **Create a dashboard** — Or use AI tools for automated reports

    5. **Review weekly** — Make MRR a regular conversation

    The companies that grow fastest are the ones that understand their MRR deeply.

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