How to Calculate MRR & ARR (SaaS Metrics)
**MRR** sums recurring subscription revenue normalized to one month. **ARR** annualizes that view for board reporting. Track **new, expansion, contraction, and churn** MRR separately—net MRR growth tells you if the base is healthy.
Core formula
MRR = Σ monthly subscription revenue · ARR ≈ MRR × 12Step by step
1. Normalize plans to monthly
Annual $1,200 → $100 MRR. Quarterly plans → divide by 3. Per-seat: seats × price per seat per month.
2. Sum active customers
Only count paying, active subscriptions—trials and paused accounts per your policy.
3. Compute ARR & growth
ARR ≈ MRR × 12 for pure monthly subs. Report net new MRR = new + expansion − contraction − churn.
MRR vs revenue vs bookings
SaaS teams confuse these—align definitions before dashboards.
- MRR: Recurring run-rate this month; operating heartbeat metric.
- ARR: Annualized MRR; common in fundraising slides.
- GAAP revenue: Recognized over time; differs with annual prepay.
- Bookings: Contract signed value; can spike without immediate MRR.
Use our calculators
Common mistakes
- Counting one-time services in MRR
- Forgetting to normalize annual contracts
- Mixing cash collected with MRR
FAQ
Do discounts reduce MRR?
Yes—net price after discount is what counts for that customer’s MRR.
Logo churn vs revenue churn?
Logo counts customers; revenue churn uses MRR lost—expansion can make net revenue churn negative.