SaaSFlow

Metric

Monthly Recurring Revenue (MRR / CMRR)

MRR (Monthly Recurring Revenue) is the predictable revenue a business receives every month from subscription-based customers. It's one of the most important metrics for SaaS (Software as a Service) businesses as it represents the stable, recurring income stream.

What is MRR?

MRR is calculated by summing up all the monthly subscription fees from active customers. It provides a clear picture of a company's predictable revenue and is essential for forecasting, growth planning, and investor reporting.

$$\text{MRR} = \sum(\text{Monthly subscription fee} \times \text{Number of customers})$$

Why MRR matters

MRR is crucial for SaaS businesses because it:

  • Predicts future revenue: Unlike one-time sales, MRR provides visibility into future income
  • Measures growth: Tracking MRR over time shows whether the business is growing, stagnating, or declining
  • Enables planning: With predictable revenue, businesses can better plan expenses, hiring, and investments
  • Attracts investors: Investors use MRR to evaluate the health and potential of SaaS companies

MRR only includes recurring subscription revenue. One-time fees, setup fees, or non-recurring charges should not be included in the MRR calculation, as they don't represent predictable monthly income.

MRR vs CMRR

CMRR (Committed Monthly Recurring Revenue) is a forward-looking metric that extends beyond current MRR by including future committed revenue from signed contracts that haven't started yet.

$$\text{CMRR} = \text{Current MRR} + \text{Future committed MRR} - \text{Known future churn}$$

MRR represents the revenue you're currently receiving from active subscriptions. It's a snapshot of your present recurring revenue.

CMRR, on the other hand, adjusts for what's known about the future:

  • It adds future MRR from contracts that have been signed but haven't started yet
  • It adds committed revenue from customers who have upgraded or extended their contracts
  • It deducts revenue from customers who have already cancelled or indicated they won't renew — even if their current subscription period is still running

Handling churn

This is the most important difference between MRR and CMRR. Consider a customer on an annual plan who notifies you in month 8 that they won't renew:

  • MRR continues to count this customer's revenue for the remaining 4 months until the subscription actually expires. From MRR's perspective, they are still an active subscriber generating revenue
  • CMRR immediately deducts this customer's revenue the moment the cancellation is known. Even though the subscription is still running and the customer is still paying, CMRR treats this revenue as already lost because it won't recur

This means CMRR is always more forward-looking and often lower than MRR when there is known upcoming churn. It gives you an honest view of where your revenue is heading rather than where it currently stands.

CMRR is particularly useful for:

  • Forecasting: Provides a more complete picture of future revenue
  • Sales pipeline: Shows the impact of signed deals that haven't gone live
  • Investor reporting: Demonstrates committed future revenue beyond current subscriptions

While MRR shows what you're earning now, CMRR shows what you're committed to earning in the future, making it a valuable metric for planning and growth projections.