Monthly Recurring Revenue Formula
Learn how to calculate ending MRR, MRR growth, ARR and net revenue retention from monthly subscription revenue movements.
This calculator reconciles recurring revenue from the start to the end of a month. It separates new-customer revenue from changes in the existing customer base, making it useful for tracking subscription performance consistently.
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Ending Monthly Recurring Revenue
Where:
Start with the month's opening recurring revenue, add revenue from new and expanding customers, then subtract revenue lost from downgrades and cancellations.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| startingMrr - Starting MRR | Recurring monthly revenue at the beginning of the month. | currency |
| newCustomers - New Customers | Number of customers who began a recurring subscription during the month. | number |
| averageNewCustomerMrr - Average New Customer MRR | Average monthly recurring revenue contributed by each new customer. | currency |
| expansionMrr - Expansion MRR | Additional monthly recurring revenue from existing customers, such as upgrades or add-ons. | currency |
| contractionMrr - Contraction MRR | Monthly recurring revenue lost from existing customers who remain but spend less. | currency |
| churnedMrr - Churned MRR | Monthly recurring revenue lost from customers who cancel completely. | currency |
Step-by-Step Calculation
Calculate new MRR
Multiply the number of new customers by their average monthly recurring revenue.
newMrr = newCustomers * averageNewCustomerMrr
Calculate ending MRR
Reconcile all recurring revenue additions and losses during the month.
endingMrr = startingMrr + newMrr + expansionMrr - contractionMrr - churnedMrr
Calculate MRR growth rate
Compare ending MRR with starting MRR as a percentage of starting MRR.
mrrGrowthRate = ((endingMrr - startingMrr) / startingMrr) * 100
Annualize ending MRR
Multiply the end-of-month MRR run rate by 12 to estimate ARR.
annualRecurringRevenue = endingMrr * 12
Calculate net revenue retention
Measure how the starting customer revenue base changed before including new-customer MRR.
netRevenueRetention = ((startingMrr + expansionMrr - contractionMrr - churnedMrr) / startingMrr) * 100
Worked example: subscription revenue movements
New MRR
8 * $150
$1,200/month
Revenue retained from the starting base
$10,000 + $500 - $200 - $700
$9,600/month
Ending MRR
$10,000 + $1,200 + $500 - $200 - $700
$10,800/month
MRR growth rate
(($10,800 - $10,000) / $10,000) * 100
8.0%
ARR run rate
$10,800 * 12
$129,600/year
Net revenue retention
($9,600 / $10,000) * 100
96.0%
Final Result
Ending MRR is $10,800 per month, with 8.0% monthly MRR growth, $129,600 annualized recurring revenue, and 96.0% net revenue retention.
Assumptions
- ✓MRR represents predictable subscription or contracted recurring revenue for one month.
- ✓New customer MRR is estimated using one average amount for all new customers.
- ✓Expansion, contraction and churn are recorded in the same monthly reporting period.
- ✓ARR is an annualized run rate based on ending MRR, not a forecast of actual yearly revenue.
Limitations
- !The calculation does not determine revenue recognition under an organization's accounting policies.
- !Usage fees, one-time services, taxes, refunds and credits may need separate treatment.
- !A single average new-customer value can hide differences among plans or customer segments.
- !Results can differ when billing dates, currency conversion, pauses or contract changes are handled differently.
Common Mistakes to Avoid
Including one-time implementation fees or project income in MRR.
Counting a downgrade as churn when the customer remains active.
Including new MRR in net revenue retention.
Using booked annual contract value instead of the monthly recurring amount.
Treating ARR as guaranteed revenue for the next 12 months.
Related Formulas
Frequently Asked Questions
How do you calculate monthly recurring revenue?
Add new MRR and expansion MRR to starting MRR, then subtract contraction MRR and churned MRR.
What is the formula for new MRR?
New MRR equals the number of new customers multiplied by their average monthly recurring revenue.
What is the difference between MRR growth and net revenue retention?
MRR growth includes revenue from new customers. Net revenue retention excludes new customers and focuses on the opening customer revenue base.
Can net revenue retention exceed 100%?
Yes. It exceeds 100% when expansion MRR from existing customers is greater than their contraction and churned MRR combined.
How is ARR calculated from MRR?
This calculator estimates ARR by multiplying ending MRR by 12.
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