Definition
MRR is the sum of all recurring revenue from active subscriptions, normalized to a monthly amount.
Annual contracts are divided by 12; quarterly contracts by 3. One-time fees and usage overages may or may not be included depending on your definition.
Components of MRR
New MRR: Revenue from new customers acquired this month.
Expansion MRR: Additional revenue from existing customers (upgrades, add-ons, seat additions).
Contraction MRR: Lost revenue from downgrades.
Churned MRR: Lost revenue from cancelled subscriptions.
How to calculate MRR
Sum all active subscriptions, normalizing annual contracts to monthly equivalents.
Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR.
Track each component separately to understand what is driving growth or decline.
MRR in a PLG context
In PLG, MRR growth is often driven more by expansion than new logos, since customers start small and grow.
Tracking MRR by acquisition source helps you understand which PLG channels are most valuable.
Implementation notes
- Be consistent about what you include in MRR—document your definition and stick to it.
- Track MRR components (new, expansion, contraction, churn) separately to understand growth drivers.
- Use committed MRR (signed contracts) for forecasting; recognized MRR for financial reporting.