What Is MRR? Meaning, Formula and MRR vs ARR
MRR means monthly recurring revenue: the money your active subscriptions bring in every month, counted as if each plan were billed monthly. To calculate it, add up what every paying subscriber pays per month, divide yearly plans by 12, and leave out one-time payments, setup fees and refunds. ARR, annual recurring revenue, is the same number viewed over a year: MRR × 12.
Why does MRR confuse new founders?
Your Stripe balance and your MRR are rarely the same number. In a month where three people bought yearly plans, the bank account looks great. The next month, nobody renews anything and the deposits look like a crash. Neither month tells you whether the business is growing.
That’s the cost of reading cash instead of MRR: you celebrate the wrong months and panic in the wrong ones. MRR smooths the billing schedule away so you can see the one thing that matters early on, which is whether recurring revenue goes up.
How do you calculate MRR?
The formula is simple:
MRR = the sum of every active subscription’s monthly amount
For each subscription, turn its price into a monthly figure:
| Plan | Price | Monthly amount for MRR |
|---|---|---|
| Monthly plan | $20 per month | $20 |
| Yearly plan | $240 per year | $20 ($240 ÷ 12) |
| Quarterly plan | $45 every 3 months | $15 ($45 ÷ 3) |
| Weekly plan | $5 per week | about $21.67 ($5 × 52 ÷ 12) |
Add them up and you have MRR. A worked example with made-up numbers: 30 customers on the $20 monthly plan and 10 on the $240 yearly plan give 30 × $20 + 10 × $20 = $800 MRR.
What should you leave out of MRR?
- One-time payments. Setup fees, lifetime deals and one-off purchases aren’t recurring.
- Free trials. A trial that hasn’t paid yet is a lead, not revenue.
- Refunded or canceled subscriptions. Count a subscription only while it’s active.
- Taxes. VAT and sales tax belong to the tax office, not to you.
What about discounts and coupons?
Count what the customer pays, not the list price. For example, a $20 plan with a 50% coupon is $10 of MRR while the coupon lasts. Counting list prices makes a promotion look like growth.
What is the difference between MRR and ARR?
| MRR | ARR | |
|---|---|---|
| Stands for | Monthly recurring revenue | Annual recurring revenue |
| Formula | Sum of monthly subscription amounts | MRR × 12 |
| Useful for | Tracking month-to-month change in a young product | Talking about the size of a business with many yearly contracts |
| Who uses it most | Indie makers and early SaaS | Larger SaaS, especially B2B with annual plans |
They describe the same revenue at a different scale. For a small product, MRR is the more useful one because you see changes sooner. ARR makes a small number look bigger, which is exactly why you should be careful with it when you compare yourself to others.
What parts of MRR should you watch?
Total MRR tells you where you are. The movement inside it tells you why:
- New MRR: revenue from customers who started paying this month.
- Expansion MRR: upgrades from existing customers.
- Churned MRR: revenue lost from cancellations.
- Contraction MRR: revenue lost from downgrades.
Net new MRR is new plus expansion minus churned and contraction. If churn eats most of what you add, the fix is in the product and onboarding, not in more marketing. Our guide on how to keep users after launch covers that side, and SaaS metrics to track after launch lists the few other numbers worth a weekly look.
How does LaunchGP use MRR?
On LaunchGP, every product that finishes a weekly Grand Prix joins LaunchGP Endurance, a race that never ends. Endurance groups cars into classes by verified MRR:
| Class | Verified MRR |
|---|---|
| Rookie | Up to $100, or no verified key |
| GT | Up to $1k |
| Prototype | Up to $10k |
| Hypercar | Over $10k |
The MRR is read with a Stripe restricted key that has read access to Subscriptions only. LaunchGP counts active and past-due subscriptions, turns each into a monthly amount, and counts each one at the lower of its list price and what its last invoice collected. So a coupon or a free trial counts as what was paid, the same rule as above.
The page shows your class, not your exact number. If you don’t add a key, you race in Rookie, and you can add one any time. How to verify MRR without sharing your Stripe account walks through creating the key step by step.
What’s the next step?
Work out your MRR once by hand with the table above, so you know what the number means. Then, if your product is live, enter it in the next Grand Prix: a free seat with the LaunchGP badge on your site, or a front slot from $9 on the pricing page. After the race, add a restricted key in your garage and race Endurance in your real class.
A seat is free with the badge, and a front slot starts at $9.
Get your seat in the next Grand Prix
FAQ
What does MRR stand for?
Monthly recurring revenue. It’s the predictable revenue your subscriptions bring in each month.
How do I calculate MRR from yearly plans?
Divide the yearly price by 12 and count that amount every month the subscription is active. A $120 yearly plan adds $10 to MRR.
Is MRR the same as monthly revenue?
No. Monthly revenue is everything you collected that month, including one-time sales and yearly plans paid up front. MRR counts only recurring subscriptions, spread evenly by month.
When should I use ARR instead of MRR?
When most of your revenue comes from yearly contracts, or when the people you talk to (often investors or larger buyers) expect it. For a young product, MRR shows change faster.
Do free trials count toward MRR?
No. A trial counts once it converts and the customer pays.