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Calculate Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR), is one of the key metrics of any subscription-based SaaS business. It is the amount of money paid monthly for subscriptions for your product or service. Calculated as a currency amount that represents all recurring revenue, MRR normalizes for various subscription terms ( pricing plans and billing periods) to measure predictable and recurring revenue components of your subscription business. It will typically exclude one-time and variable fees, but for month-to-month businesses could include such items.

Importance of Calculating Your MRR

  • Determine if your sales and marketing efforts are effective.
  • Know your sales’ strengths and opportunities.
  • Determine the right budget for the next year to achieve your sales goals.
  • Help business owners make sound business decisions based on the result of MRR.

Different MRR calculations

  • Customer-by-customer MRR
  • The average revenue per account MRR
  • Net New MRR

How to calculate MRR

1. Connect your data source

First, you will need to make sure that your customer payment data is properly sent to Intempt Platform. Go to Sources -> Create a source and set up an Intempt JS tracker on your website.

2. Create event collections

To start tracking all your transactions, cancellations, and downgrades you will need to create specific event collections linking to these actions.

3. Build your metric

Type 1: Customer-by-customer MRR

The most simple way to calculate the MRR is to sum the monthly fee paid by every single paying customer of your installed base.

Example: let’s say you have Customer A paying $250/mo and Customer B paying $400/mo. Your MRR would be $650.

Metric creation:

Go to “Metrics” -> Create a new metric, define the month you want to analyze select the format and choose the required metric creation options from the dropdown.

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Type -> Collection

Source -> your JS tracked website

Collection -> subscriptions

Field -> subscription amount

Aggregation Total

However, this approach does not take into account that each customer may be paying a different amount since you can have different plans or event different products in your portfolio.

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Type 2: MRR based on the average revenue per account

Another way is to multiply the total number of paying customers by the average revenue generated per account

To calculate the MRR, the total revenue generated by all customers (paying subscribers) during the selected period should be divided by the total number of customers.

Example: you have five customers. Three of them are paying $200/month, one is paying $125/month and another is paying $80/ a month. When divided by the number of customers (5), you get the MRR ($161 in this case).

Metric creation:

Go to “Metrics” -> Create a new metric, define the month you want to analyze select the format and choose the required metric creation options from the dropdown.

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Type -> [A and B] - Collection

Source -> [A and B] - your JS tracked website

Collection -> [A] - subscription (the exact name depends on the naming convention); [B] -subscribed users

Field -> [A] - subscription amount; B - subscribed user count

Aggregation [A and B] - total

MRR Total revenue / Total # of Customers

UI formula: A/B

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Type 3: Net New MRR

SaaS companies may need to calculate multiple MRR numbers, depending on the complexity of their businesses. To analyze MRR in-depth – and specially MRR growth – we need to combine three different MRRs: new MRR, expansion MRR and churn MRR into a single metric.

Let’s combine these metrics by creating new rows in the metric builder UI.

[A] New MRR

New MRR is the new revenue brought by brand new customers acquired.

Example: you have acquired on a given month 6 new customers paying $150/mo and 2 new customers $250/mo. Your New MRR for that month would be $1400.

Metric creation:

Type -> [A] - Collection

Source -> [A] - your JS tracked website

Collection -> [A] - revenue collections from new subscribers

Field -> [A] - subscription amount

Aggregation [A] - total

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[B] Expansion MRR

Add-on MRR from existing customers (buying additional product features, upgrading the account, adding new users, etc.).

Example: For example, you have 3 customers that upgraded their plans from $100/mo to $200/mo. Your Expansion MRR for that month would be $300.

Metric creation:

Type -> [B] - Collection

Source -> [B] - your JS tracked website

Collection -> [B] - revenue collections from new subscribers

Field -> [B] - subscription amount

Aggregation: [B] - total

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[C] Churn MRR

The monthly revenue lost from cancellations and downgrades. Keep in mind that MRR churn is different from customer churn.

Example: in a given month you had 3 cancellations of $150/mo plans and the other 3 customers downgraded their plans from $400/mo to $100/mo. Your Churn MRR would be $1350

Metric creation:

Type -> [C] - Collection

Source -> [C] - your JS tracked website

Collection -> [C] - revenue collections from new subscribers

Field -> [C] - subscription amount

Aggregation: [C] - total

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Final Formula:

Net New MRR = [A] New MRR + [B] Expansion MRR – [C] Churn MRR

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In order to combine these two metrics into one, you will need to type in the formula “A+B-C” and select “Apply”.

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A new metric of “New Net MRR” will be created and you will be able to view its graph above the formula definition.

Analyze the results

The New Net MRR metric graph will display the trend of your business performance - whether you lost more revenue than you gained within a month’s time.

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However, you should also look into different MRR numbers as well. If you measure a higher churn MRR than your new MRR, you are likely losing as many customers as you are gaining each month.

When your add-on MRR is higher than your churn MRR, that means you’ve figured out how to have positive retention (or negative churn). Enough of your existing customers are upgrading, countering the revenue lost from the customers who are canceling. In this scenario, the average new customer you acquire will grow your revenue.

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