MRR is calculated in the most straightforward way:
MRR = number of active customers × ARPA
where ARPA (Average Revenue Per Account) is the average revenue per account per month. Annual subscriptions are converted to a monthly basis (e.g. a €1,200/year subscription counts as €100 of MRR).
Numerical example. An SME SaaS company has 80 customers paying an average of €50/month:
The value of MRR lies in its predictability: unlike one-off revenue, it indicates the expected revenue baseline for the following month, all else being equal. This recurring baseline provides cash flow reassurance and is used to value subscription-based businesses.
Total MRR can hide opposing movements. To understand growth, the monthly change is broken down as follows:
Net growth is then calculated as:
Net MRR gained = New + Expansion − Contraction − Churned
Example. In one month: +€600 new, +€200 expansion, −€150 churned. Net MRR gained = 600 + 200 − 150 = +€650. Two companies may show the same new MRR but have very different trajectories depending on their churn.
Churn (attrition rate) is the percentage of customers — or MRR — lost over a period. It acts like a leak: as long as it remains high, a portion of new sales only serves to replace departures rather than growing the baseline.
An illustrative benchmark: with a 5% monthly churn, a €4,000 MRR base automatically loses €200 per month with no new sales or expansion. Therefore, at least the same amount of new + expansion is needed just to break even.
This is why subscription businesses monitor MRR and churn together: sustainable growth comes as much from retention (reducing churned MRR, driving expansion) as from acquisition. Properly managing subscriptions — renewals, plan changes, cancellations — is the key to healthy MRR; this is the role of Orizen’s subscription management, which tracks every recurring revenue movement.
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Essai gratuit 14 jours What the Orizen subscription management module costsMRR (Monthly Recurring Revenue) is the monthly recurring revenue, while ARR (Annual Recurring Revenue) is its annualised equivalent: ARR = MRR × 12. Operations are often managed monthly using MRR, whereas ARR is used for annual reporting or company valuation. Both measure the same recurring baseline, just on different time scales.
Churn removes recurring revenue with every cancellation (churned MRR) and every downgrade (contraction MRR). These losses are subtracted from gains (new + expansion) to give net MRR. High churn forces you to sell a lot just to offset departures, which caps growth: reducing churn and driving expansion are often more profitable than accelerating acquisition alone.
Everything is normalised to a monthly basis: an annual subscription billed at €1,200 counts as €100 MRR (€1,200 / 12). This normalisation lets you compare monthly and annual customers on the same scale and obtain a consistent MRR. Note that MRR (smoothed monthly revenue) is not the same as actual cash received, which may be collected in a single payment at the start of the year.