What is monthly recurring revenue (MRR)? Meaning, formula

Monthly recurring revenue (MRR) is a critical metric for subscription-based businesses, especially within the SaaS industry, as it reflects the revenue generated from active subscriptions each month. MRR serves as a key indicator of a product's value, holistic performance, and is essential for accurate forecasting and budgeting. To calculate MRR, multiply the number of monthly subscriptions by the average revenue per paying user (ARPPU). Enhancing MRR involves strategies like increasing the number of subscriptions through reducing churn, improving conversion rates, and expanding user reach, as well as optimizing ARPPU by adjusting pricing, plan share, and generating additional recurring revenue through add-ons. While focusing on ARPPU can significantly impact MRR, it might also negatively affect other metrics such as conversion rates and churn, necessitating a balanced approach between short-term gains and long-term sustainability.