What Is MRR? (And Why It's the North Star SaaS Metric)
MRR normalises all subscription revenue into a predictable monthly number. It excludes one-time payments, setup fees, and annual plans paid upfront — instead, it counts only the recurring portion. A customer on a $1,200 annual plan contributes $100 MRR per month.
MRR is the velocity metric: it tells you how fast the business is growing right now. ARR is the scale metric: it shows the current annualised size. Together they're the first two numbers in every board deck and every funding conversation.
The T2D3 Benchmark
The classic SaaS path is "Triple, Triple, Double, Double, Double" ARR over five years: $1M → $3M → $9M → $18M → $36M → $72M. To hit this, you need consistent 20%+ MoM growth in early stages, transitioning to sustained 15–20% as you scale.
The Four Components of Net New MRR
New MRR is the purest growth signal — revenue from customers who never paid you before. Expansion MRR comes from existing customers who upgrade, buy more seats, or add features.
Churned MRR subtracts what you lose to cancellations and downgrades. Reactivation MRR adds back customers who left and returned. Tracking all four separately is far more useful than watching total MRR alone.
20%
MoM growth for top-quartile early SaaS
2–3%
Maximum acceptable monthly churn
110%
Target Net Revenue Retention to grow without new customers
12×
Multiply ending MRR by 12 to get ARR
MRR vs ARR — When to Use Which
Use MRR for operational tracking — it shows momentum and week-to-week signal. Use ARR for fundraising, valuation, and benchmarking — investors value SaaS companies as multiples of ARR.
Never multiply monthly bookings by 12 to get ARR. ARR = current MRR × 12. If MRR is growing, today's ARR will understate next year's ARR — which is expected, but be precise about what you're reporting.