MRR vs Revenue

Monthly Recurring Revenue (MRR) and Revenue measure business income in fundamentally different ways, each serving distinct analytical purposes. MRR specifically tracks predictable, subscription-based income that a company expects to receive every month, excluding one-time payments, variable fees, or non-recurring charges. Revenue, in contrast, represents the total income generated from all sources during a given period, including both recurring and non-recurring elements such as one-time purchases, service fees, installation charges, and any other money received from customers. While MRR focuses exclusively on the stable, predictable portion of income, Revenue provides a comprehensive picture of all money flowing into the business.

A SaaS company should emphasize MRR when forecasting future growth, planning cash flow, or communicating predictability to investors, as it highlights the stable foundation of the business model. For example, when determining whether to invest in new product development or hire additional staff, a company with $500,000 in MRR can confidently plan around having at least that amount available monthly, regardless of fluctuations in one-time sales. Conversely, the same company would reference total Revenue when preparing financial statements, analyzing seasonal trends, or evaluating the success of a promotional campaign that included both subscription sign-ups and one-time purchases. If the company launched a limited-time offer that generated significant one-time implementation fees, these would substantially increase quarterly Revenue without affecting MRR, making Revenue the more appropriate metric for measuring the campaign's immediate financial impact.

Monthly Recurring Revenue

Revenue

What is it?

Monthly Recurring Revenue (MRR) is the sum of all subscription revenue expressed as a monthly value. For most companies, MRR is the sum of all new business subscriptions and upgrades (sometimes called expansion), minus downgrades (or contractions) and cancelled subscriptions. Though not a Generally Accepted Accounting Principle (GAAP) value, it's the Revenue equivalent used by every SaaS company. MRR is used interchangeably with ARR.

Revenue is defined as the income generated through a business’ primary operations. It is often referred to as “top line” and is shown at the top of an income statement.

Formula

ƒ Sum(Recurring Revenue irrespective of billing interval expressed as a monthly value)
ƒ Sum(Revenue)

Example

If 10 customers are paying $150 per month, then MRR would be; MRR = $1500 If 7 customers are paying $200 per month, and 3 customers are paying $100 per month, then MRR would be; MRR = $1700

If a customer signs an annual contract for $12,000 consisting of monthly payments, then the revenue for each month of that year is $1,000, and the revenue for that year is $12,000.

Published and updated dates

Date created: Oct 12, 2022

Latest update: Oct 12, 2022

Date created: Oct 12, 2022

Latest update: Oct 12, 2022