Full Definition
MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) are key metrics for subscription-based businesses that measure the predictable, recurring revenue generated from customers on a monthly or annual basis.
Calculating MRR
- New MRR: Revenue from new customers acquired this month
- Expansion MRR: Additional revenue from existing customers (upgrades, add-ons)
- Churned MRR: Revenue lost from cancellations or downgrades
- Net New MRR: New MRR + Expansion MRR - Churned MRR
ARR = MRR × 12
ARR is simply MRR multiplied by 12. It's the preferred metric for companies with annual contracts and for calculating SaaS company valuations.
MRR/ARR Benchmarks for Fundraising
- Seed: $0 - $50K MRR
- Series A: $50K - $200K MRR ($600K - $2.4M ARR)
- Series B: $200K+ MRR ($2.4M+ ARR)
MRR / ARR Calculations
MRR × 12New MRR + Expansion MRR − Churned MRR500 customers × $100/mo = $50K MRR = $600K ARRReal-World Example
A SaaS startup with 500 customers paying $100/month has $50K MRR ($600K ARR). With 20% monthly growth, they target $200K MRR for Series A.
Frequently Asked Questions
What is the difference between MRR and ARR?
How do you calculate MRR?
What MRR do you need for Series A?
Related Terms
The strategy a company uses to generate income from its product or service.
The percentage of customers or revenue lost over a specific period, a key SaaS health metric.
The direct revenues and costs associated with a single unit of a business model (typically per customer).
A software distribution model where applications are hosted in the cloud and accessed via subscription.
The estimated monetary worth of a company, determined through various methods and negotiations.
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