MRR

What it means

MRR is normalised monthly recurring revenue: the sum of regular payments expressed per month. An annual subscription is divided by twelve; one-off payments are not counted at all.

The point is that MRR shows the sustainable part of revenue. A company turning over the same amount from one-off projects and one earning it from subscriptions have entirely different predictability.

A related measure is ARR, annual recurring revenue, essentially MRR times twelve, used for annual contracts and in conversations with investors. Both measure the current state of contracts, not what the company actually invoiced over the year. They therefore cannot be compared directly with turnover in the financial statements.

How it works in practice

It is tracked in components: new MRR, expansion within existing clients, contraction, and loss through departures (churn). That breakdown answers whether growth comes from acquisition or from existing relationships.

It is mostly used in SaaS, but works just as well for bookkeeping, maintenance contracts and retainers. With unit economics it forms the basis of a revenue forecast.

When a business with recurring income is sold, the buyer asks precisely about MRR and how it has developed. As the accounting firm, we then reconcile the reported MRR with invoices and payments received, so that the business valuation rests on figures backed by documents, not just on a spreadsheet from the subscription system.

What to watch out for

MRR is not accounting revenue and must not be mixed with it in the statements. One-off fees and unpaid invoices do not belong in it - include them and the metric loses precisely the property it is tracked for.

A common distortion is calculating MRR from list prices instead of the prices actually agreed. Discounts, free months and promotional bundles reduce what customers really pay, and ignoring them makes growth look better than it is. After a change in pricing, MRR is therefore adjusted only once customers actually start paying the new prices.