MRR and ARR Explained

MRR (Monthly Recurring Revenue) is the total predictable, normalised monthly revenue from all active subscriptions at a given point in time.

Calculating MRR:

• Sum all monthly subscription payments from active subscribers
• For annual subscribers: divide their annual fee by 12 to get normalised monthly MRR
• For weekly subscribers: multiply weekly fee by 52/12 to normalise to monthly

Example: 100 subscribers paying £25/month = £2,500 MRR. Plus 10 annual subscribers paying £240/year = £200 MRR (£240÷12×10). Total MRR = £2,700.

Breaking down MRR by movement type gives you the full picture of what's driving change:

• New MRR — revenue from brand new subscribers acquired this month
• Expansion MRR — additional revenue from existing subscribers who upgraded or added seats
• Contraction MRR — lost revenue from subscribers who downgraded (negative)
• Churned MRR — revenue lost from cancellations (negative)
• Reactivation MRR — revenue from former subscribers who returned

Net New MRR = New + Expansion + Reactivation − Contraction − Churned

AskBiz shows this breakdown automatically in the Subscription dashboard when Stripe is connected.

ARR (Annual Recurring Revenue) = MRR × 12.

ARR is used for:

• Investor and board reporting — easier to communicate at scale ('we're a £1m ARR business')
• Business valuation — SaaS businesses are typically valued at a multiple of ARR
• Goal-setting — annual revenue targets

ARR is a snapshot extrapolation, not a promise. It assumes MRR stays constant for 12 months — which it won't. It is useful for communication and valuation but should not be used for cash flow planning.

1. Including one-off payments: setup fees, professional services, one-time charges should not be in MRR — they are not recurring. Include only the recurring subscription element.

2. Not normalising annual plans: an annual subscriber paying £240 upfront is not £240 of MRR — they are £20/month. Failing to normalise overstates MRR in the month of payment.

3. Including paused subscribers: subscribers who have paused (not cancelled) are typically excluded from active MRR until they reactivate. Check your definition.

4. Gross vs. net MRR: some businesses report gross MRR (before refunds and failed payments) and net MRR (after). For meaningful analysis, use net MRR — it reflects actual cash received.