MRR or Monthly Recurring Revenue describes the average amount of revenue generated monthly from consumers. It is a key indicator and metric of business success, as it represents the stability and predictability of future monthly income. To calculate MRR, simply take the total revenue from all customers in a given month, and divide it by the number of customers. This will give you the average amount each customer spends per month.
There are a few things to keep in mind when calculating MRR:
- First, only include recurring revenue streams in your calculation. This means subscription fees, membership dues, and other regular monthly payments. One-time payments or one-off services should not be included.
- Second, make sure to exclude any discounts or promotions from your calculation. You want to get an accurate picture of the average monthly spend, so only include the regular price.
- Finally, if you have customers who are on different pricing plans (e.g. basic, premium, etc.), be sure to calculate their MRR separately. This will give you a more accurate picture of your overall MRR.
Now that you know how to calculate MRR, let's take a look at some ways to increase it.
1. Offer new product subscriptions or one time services
2. Increase prices for existing product subscriptions or services
3. Add new features or content to your product that customers will find valuable
4. Offer discounts or promotions to attract new customers or encourage old ones to spend more
5. Improve your customer retention rates by providing a better overall experience
By following these tips, you will start to see your MRR rate increase, which will lead to higher profitability in your business.
How is MRR calculated?
MRR is calculated by multiplying the number of customers by the average monthly revenue per customer.
What are some examples of businesses that use MRR?
Businesses such as software companies, SaaS providers, and subscription-based services typically use MRR to measure their recurring revenue.
Fun Fact:
"Monthly Recurring Revenue (MRR) is a key metric for measuring the health of a SaaS business. According to a survey conducted by ProfitWell, MRR is the most important metric for 82% of subscription businesses." (ProfitWell, 2019).