MRR (Monthly Recurring Revenue)

Monthly Recurring Revenue (MRR), known in Spanish as “Ingresos Recurrentes Mensuales”, is one of the most important indicators for companies that operate under subscription models, such as SaaS (Software as a Service) companies.

This term refers to the predictable and recurring revenue that a company generates each month from its subscriber base.

In other words, MRR is the backbone of any subscription-based business, as it provides a clear and direct view of the company’s financial stability and growth potential.

Why is MRR so relevant?

MRR is crucial because it allows companies to make more accurate predictions about their future revenue.

Unlike one-off revenue generated by single sales, recurring revenue is much more predictable and stable, which makes long-term financial planning easier.

A company that relies solely on one-off sales will face months of fluctuating revenue, whereas a company with a recurring revenue model can forecast its monthly earnings more accurately.

In addition, MRR is especially valuable to investors, as it shows how stable the business is.

The higher the MRR, the more confident investors will be that the company has a solid source of revenue and does not depend solely on new customers each month.

This is particularly relevant for startups and emerging companies looking to attract external capital.

How is MRR calculated?

Calculating MRR is relatively straightforward, but it is critical to do it correctly to get an accurate representation of recurring revenue:

• Identify the number of active subscribers: this includes all customers who are currently paying for a subscription plan.
• Determine the average monthly subscription value: the total that each subscriber pays each month should be considered.
• Multiply the number of subscribers by the monthly subscription value: the result is the total MRR.

For example, if you have 100 subscribers paying €50 a month, your MRR will be €5,000.

Different types of MRR

There are different subcategories of MRR that can help you get a more nuanced view of your recurring revenue:

New MRR

This type of MRR comes from new customers who have subscribed during the month.

It is a key indicator of the growth of your user base.

Expansion MRR

This is the MRR that comes from existing customers who have increased their spending, either because they have switched to a more expensive plan or have purchased additional products or services.

Churned MRR

This refers to the MRR lost due to subscription cancellations.

It is an indicator of customer retention and can help you detect problems before they turn into a crisis.

Net New MRR

This metric is the result of adding New MRR and Expansion MRR, and subtracting Churned MRR.

It is one of the clearest ways to measure the net growth of your monthly recurring revenue.

MRR and its relationship to email marketing

An effective email marketing strategy can be key to increasing your MRR.

Email marketing campaigns allow companies not only to attract new customers but also to improve the retention of existing ones, which has a direct impact on MRR.

With email marketing, you can segment your customers based on their needs and offer them promotions or product updates tailored to their profile.

For example, if you notice that a segment of users is about to cancel their subscription (which would increase your churned MRR), you could send them a personalized offer that encourages them to stay.

In addition, email retargeting campaigns can be highly effective in increasing Expansion MRR, as they encourage existing customers to upgrade their subscriptions or purchase additional services.

Tools for managing MRR

Today, there are numerous tools and platforms that help companies manage and monitor their MRR efficiently.

• Stripe: this payment processor is widely used by SaaS companies and offers a detailed view of the MRR, including expansions, cancellations and new recurring revenue.
• Baremetrics: it is a financial analytics tool that integrates with Stripe and other payment platforms to provide detailed analysis of MRR and other key metrics.
• Chargebee: Specializing in subscription management, Chargebee makes it easy to track MRR and provides advanced reporting to detect growth or contraction trends.

These tools give companies control over their recurring revenue and let them make data-driven decisions about their growth and sustainability.

MRR and customer retention

Another critical aspect of MRR is customer retention.

As mentioned earlier, churned MRR reflects the revenue lost due to subscription cancellations.

Reducing churn is vital to maintaining a stable or growing MRR.

Customer retention is especially important for SaaS and subscription companies.

Even if New MRR is high, a high churn rate can erode growth.

This is where the value of loyalty strategies comes into play:

• Quality customer service
• Regular product updates
• And, of course, well-structured email marketing campaigns.

A good example of this is setting up automated emails that are sent to customers when they haven’t used the service for a while, inviting them to come back or giving them guides on how to get the most out of the product.

Tactics like these can reduce churned MRR and therefore help maintain or increase net MRR.

Factors influencing MRR growth

To increase MRR, companies must focus on both attracting new customers and maximizing the value of existing customers.

Optimizing customer acquisition:

Increasing New MRR requires a solid customer acquisition strategy.

This is where a combination of content marketing, social media campaigns and, of course, email marketing comes into play to attract and convert new subscribers.

Improve retention

As mentioned above, retaining customers is crucial to maintaining a strong MRR.

This involves offering excellent customer support, continually improving the product or service and maintaining constant communication with users.

Up-selling and cross-selling

These techniques are key to increasing Expansion MRR.

Offering additional products or services that complement what your company already offers is an effective way to increase the value of each customer.

Price adjustment

As a company grows and its product matures, it may be necessary to adjust prices.

This can have a positive impact on MRR, but it must be done carefully to avoid also increasing churned MRR.

Conclusion

Monthly Recurring Revenue is an essential metric for any company operating under a subscription model.

Not only does it provide a clear view of monthly revenue, but it is also a key indicator of long-term success.

Implementing strategies to maximize MRR, such as effective use of email marketing and customer retention, is critical to ensure sustainable and predictable growth.