What is Monthly Recurring Revenue (MRR)?
Short Answer
MRR is the total monthly revenue expected from subscription customers at a point in time, the foundational metric for SaaS companies and one of the earliest indicators investors examine.
Full Explanation
MRR is calculated as the sum of all active subscription contracts divided by 12 and annualised to Monthly Recurring Revenue. For example, if a SaaS company has 50 customers on £1,000/month plans and 30 customers on £500/month plans, MRR = (50 × £1,000) + (30 × £500) = £65,000. MRR excludes one-time setup fees, professional services, and variable usage fees — it reflects predictable, recurring income. Investors care about MRR because it is predictable (versus project revenue which is lumpy) and shows the underlying business momentum independent of sales variability. VCs look at Month-over-Month MRR growth rate (typically 5-10% monthly growth in early-stage SaaS is strong, with elite companies growing 15%+ monthly). MRR growth, net revenue retention (how much revenue existing customers expand), and churn rate are the primary metrics that determine SaaS valuations. A company with £100K MRR growing 10% monthly is significantly more valuable than one with £100K MRR but 2% monthly growth. The Opagio calculator can model the impact of MRR changes on company valuation.
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Further Reading
What is Customer Lifetime Value (LTV)?
LTV is the total profit a company expects to generate from a customer relationship over its lifetime — calculated as (ARPU × Contribution Margin) / Monthly Churn.
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