What is Monthly Recurring Revenue?

Monthly Recurring Revenue (MRR) is a term used in product management to describe the predictable and recurring revenue generated by a subscription-based business model. It is the amount of revenue a company can expect to receive on a monthly basis from its customers who are subscribed to its products or services.

How is MRR calculated?

MRR is calculated by multiplying the number of subscribers by the monthly subscription fee. For example, if a company has 100 subscribers paying $10 per month, its MRR would be $1,000.

It is important to note that MRR only takes into account the recurring revenue generated by subscriptions and does not include one-time purchases or fees. It is also important to consider the churn rate, which is the rate at which customers cancel their subscriptions, as this can impact the MRR.

Why is MRR important?

MRR is an important metric for subscription-based businesses as it provides insight into the company's revenue stream and growth potential. By tracking MRR, product managers can identify trends and make data-driven decisions to improve customer retention and acquisition.

MRR can also be used to calculate other important metrics such as Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC). CLV is the total amount of revenue a customer is expected to generate over their lifetime as a subscriber, while CAC is the cost of acquiring a new customer. By comparing these metrics to MRR, product managers can determine the profitability of their subscription-based business model.

Conclusion

Monthly Recurring Revenue is a key metric for subscription-based businesses. By tracking MRR, product managers can gain valuable insights into their revenue stream and make data-driven decisions to improve customer retention and acquisition. MRR can also be used to calculate other important metrics such as CLV and CAC, which can help product managers determine the profitability of their business model.