MRR stands for Monthly Recurring Revenue, the total profit for a particular month. It is calculated by multiplying the number of subscribers by the average revenue per user(ARPU). Any recurring discounts, coupons, etc., are accounted for, but one-time fees are excluded.
Net MRR would be your existing MRR, revenue from new users added, and loss from downgrading or lost customers deducted.
Net MRR Growth Rate measures the increase or decrease in MRR over successive months as a percentage. Net MRR changes monthly as new subscribers add revenue, and customer churn causes revenue loss.
Net MRR Growth Rate tracks these variations and indicates how your SaaS Company is growing.
Net MRR Growth rate gives you an accurate picture of how fast your company is growing. With this clear picture of the revenue potential, you have insight into the next leaps of growth.
Net MRR Growth Rate tracks financial performance over months, a reasonable period for a subscription model company, as opposed to weeks or years. It provides periodic insights into progress toward the annual revenue quota, helping set realistic financial goals as per finances.
Net MRR Growth Rate is essential for making correct sales projections and planning for growth. By analyzing Net MRR, you can anticipate the revenue for the next month and accordingly increase your sales efforts to reach your targets.
Net MRR also predicts revenue flow, giving you an accurate idea of the resources at your disposal after deducting expenditures. These figures are a solid basis for reliable decisions to budget your expansion.
To calculate the Net MRR Growth Rate, calculate first the Net MRR as follows:
Net MRR = (Existing MRR + New MRR + Reactivation MRR + Upgrade MRR) - (Cancellation MRR + Downgrade MRR)
To get the Net MRR Growth Rate, run the Net MRR calculation for the previous and current months and use the formula below.
MRR Growth Rate % = [ Net MRR Month B - Net MRR Month A ] / Net MRR Month A X 100
For example, with a $1000 Net MRR for the first month and $3000 for the second month, the growth rate will be 200%.
($3000 - $1000) / $1000 X 100 = 200%
There are no definitive benchmarks for monthly MRR Growth, but some guidelines can be kept in mind for different stages of growth for SaaS companies. A Net MRR Growth Rate of 10-20% is considered positive, and a 15-20% month-on-month growth for SaaS companies is a good target.