What is monthly recurring revenue (MRR)?
Monthly recurring revenue (MRR) is a key financial metric that tracks the predictable income you earn each month from your customers’ subscriptions or services. Consistent cash flow is crucial, especially for businesses operating in technology sectors where long-term subscriptions are common. To calculate MRR, simply multiply the number of customers by the average monthly billed amount. For example, if you have 200 app customers paying an average of $50 per month, your MRR is $10,000.
Monthly recurring revenue calculation = (# of customers) x (Average monthly billed amount)
As a channel professional, MRR can provide some key insights into your business growth, as it can account for:
- New business MRR: Revenue generated from new customers who’ve signed up for your product or service in a specific month
- Expansion MRR: Additional revenue from existing customers, often through upselling or cross-selling
- Churn MRR: Lost revenue due to customers canceling their subscriptions or downgrading to a cheaper plan
Understanding MRR is vital for your partnerships strategy as it can help you forecast future revenue, track growth, and measure the success of your partnerships. Use it as a tool to stay informed and ready to navigate your business through the evolving market dynamics.