Monthly Recurring Revenue (MRR): The Formula, the Five Movements, and Real Numbers
One number tells you more about a subscription business than any other line on the P&L. Here's how MRR actually works — the formula, the five movements, the sins — illustrated with monthly revenue real founders have disclosed.
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Monthly recurring revenue (MRR) is the normalized monthly value of every active subscription a company holds. Not cash collected this month, not bookings signed this month — the steady-state monthly worth of the recurring contracts in force right now. A customer paying $99 a month adds $99 of MRR. A customer who prepaid $12,000 for a year adds $1,000.
MRR = the sum of all recurring subscription fees, normalized to one month (annual contracts ÷ 12; one-time fees excluded)
Its power is comparability: every month answers the same question, and the trend line is the business.
The five movements
A single MRR total hides more than it shows. The useful discipline is decomposing each month into five movements:
| Movement | What it is |
|---|---|
| New MRR | First-time subscription revenue from new customers |
| Expansion MRR | Existing customers paying more — upgrades, seats, usage |
| Contraction MRR | Existing customers paying less — downgrades |
| Churned MRR | Revenue lost to cancellations |
| Reactivation MRR | Former customers returning |
Net new MRR — new + expansion + reactivation − contraction − churn — is the month’s verdict. Two companies adding the same $100K of net new MRR can be in opposite health: one adds $110K of new business and loses $10K; the other adds $250K and loses $150K through a leaking bucket. The movements tell you which one you are; the total doesn’t.
What real MRR looks like
Founders on the record with GetLatka, at four very different scales:
Workboard was doing $500–600K a month in September 2018 — about 50 enterprise customers, which is how six figures of MRR can rest on a customer count you can fit in a room. Webflow hit $1.2M a month in July 2018 the opposite way: 30,000 customers at roughly $40 each. SafetyWing reported about $2M a month in April 2023, blending 25,000 consumer policies with higher-priced company plans. And UserTesting was around $7M a month in early 2020 on its way through $100M ARR. Same metric, four different machines — which is exactly why investors normalize to it.
MRR vs. ARR vs. revenue
ARR is MRR × 12 — the same number in annual clothing, conventional once contracts are mostly annual. Both differ from GAAP revenue, which recognizes what was earned in the period regardless of contract shape. The practical rule: operators steer monthly by MRR movements, boards compare by ARR, accountants close the books on recognized revenue — and trouble starts when someone quotes one pretending it’s another. “Run rate” almost always means current MRR × 12; said of a seasonal or spiky month, it flatters. (More on annualized comparisons in our revenue growth guide.)
The classic miscounts
Three sins account for nearly every inflated MRR figure we’ve seen. One-time fees counted as recurring — setup, implementation, services. Workboard’s Deidre Paknad modeled the honest version: her customers paid meaningful onboarding fees, and she excluded every dollar of them from contract-value metrics. Bookings counted before they bill — a three-year deal signed today is bookings; its MRR arrives month by month. Prepayments counted at cash value — an annual prepay is a cash-flow gift and an MRR/12 fact, not a great month.
The subtler distortion is discount-masking: listing MRR at rack rate while customers actually pay negotiated prices. MRR is what they pay, not what the price page says.
Growing it: the three levers
Every MRR growth story reduces to some mix of three levers. More customers — Webflow’s route: organic acquisition at an $85 CAC, no sales team, volume compounding 100% a year. More per customer — Workboard’s route: land at $50K, expand to $200K inside a year, ~140% net revenue retention. Less leakage — the quiet lever: Webflow’s hosting plans churned near zero, which meant every month’s new MRR stacked on top of last month’s instead of refilling it.
The mix is a strategy choice, and it shows up directly in how much each dollar of growth costs — which is where MRR hands off to ACV, CAC payback, and the rest of the unit-economics stack.
Compare disclosed revenue for thousands of SaaS companies at getlatka.com/saas-companies.