Monthly recurring revenue as key performance indicator
The MRR as KPI in the subscription business
The Monthly Recurring Revenue (MRR) is one of the most important financial metrics in the subscription business.
The MRR is the key figure that gives you a real-time view of your monthly subscription revenue. From this metric, you can deduce the financial situation of your company – from which you can then create plans for business growth.
The Monthly Recurring Revenue prospectively captures the revenue that a company generates from all active subscriptions in a given month. This calculation includes recurring payments, discounts and benefits, but not one-time payments.
The month as basis for reviewing recurring revenue
In the subscription business context, a month is the appropriate period to measure growth. MRR is suitable for reviewing recurring revenue and ensuring a steady cash flow each month. In addition, MRR metric allows companies to see at a glance how many new customers have signed up and how many have churned.
Recording the monthly recurring revenue shows the current situation and highlights trends. Thus, this key figure facilitates both the retrospective and the forecast of future revenues.
Of course, the MRR also helps – by comparing monthly revenues and expenses – to estimate the available resources and to make budget planning decisions (as to increase expenses or save money).
MRR Reporting
Because of the benefits that MRR brings to the subscription business, our software offers a special reporting function that captures the MRR.
The MRR reporting delivers detailed results and makes revenue forecasts, from which you can derive actions and steps to support the growth of your business.
Breakdown of the MRR in reporting
However, capturing the MRR only makes sense if you go beyond a simple calculation and break it down into different values of MRR in the analysis. In this way, the development of the business can be analyzed more precisely.
One advantage, for example, is to separately record additional monthly revenue from new customers or from the expansion of services for existing customers, as well as the loss of revenue due to customer churn, and to include this in the overall analysis.
Differentiation of MRR
For reporting purposes, our software allows to determine the following values of MRR:
- Actual MRR
- Initial MRR
- Previous MRR
- Change MRR
- Smooth Change MRR
- Expansion MRR
- Churn MRR
For more information on the MRR survey and other key performance indicators, please refer to our technical documentation.
