Financial
Monthly Recurring Revenue (MRR)
MRR tracks the total predictable revenue that a business expects to receive every month from its subscribed customers. It is a vital metric for companies with subscription-based business models, providing a clear view of steady income streams.
HOW TO MEASURE
MRR is calculated by summing up all recurring revenue from active subscriptions for the month. It typically excludes one-time charges, discounts, and credits.
HOW TO IMPROVE
Increase Customer Base: Acquiring new subscribers through marketing and sales efforts.
Reduce Churn: Implement strategies to retain existing customers.
Upsell and Cross-sell: Encourage existing customers to upgrade their subscriptions or buy additional products.
Optimize Pricing: Adjust pricing models to better match customer value perception and competitive landscape.
FORMULA
MRR = Total number of paying customers ร Average revenue per user (ARPU)
EXAMPLE
A SaaS company offers a project management tool with three subscription plans: Basic ($10/month), Advanced ($20/month), and Premium ($30/month). If they have 100 Basic, 150 Advanced, and 50 Premium subscribers, their MRR would be: ๐๐ ๐ =(100ร10)+(150ร20)+(50ร30)=$5,500
DEPARTMENT USAGE
Leadership: For strategic planning and assessing the companyโs financial health.
Sales and Marketing: To evaluate the effectiveness of sales strategies and marketing campaigns.
Customer Success: To understand revenue impacts from customer retention efforts.
Product: To gauge how changes in the product affect revenue.
Finance: For financial forecasting and reporting.
Other departments may also refer to MRR for performance benchmarks and in strategic meetings.
View the collection of Metrics Workshops.