One of the most important metrics you should be tracking in a subscription-based SaaS business is your ongoing revenue from those subscriptions.
Here’s a quick walk-through for startup SaaS businesses on how to calculate monthly recurring revenue (MRR).
Calculating MRR for Your SaaS Startup
To calculate SaaS MRR, start by totaling the monthly subscription values of each of your current customers. If you have customers that are on multi-month subscriptions, simply take those contract values and divide by the number of months in the subscription period.
For clarity, here’s an example:
Say you have 20 customers with half on your basic plan priced at $10/month and the other half on your premium plan at $120/year that pays all upfront.
Your MRR would be (10 x $10) + (10 x $120/12) = $200.
Your total revenue for that month may have been significantly different from $200 if you have any nonrecurring payments, such as one-time installation fees for new customers or additional charges on top of the monthly contract value for usage or data overages.
That’s because SaaS MRR does not measure cash flow or receipts; it measures how quickly and efficiently you’re growing topline revenue.
Are you a startup founder who wants to learn more about SaaS metrics?
This guide explains the 8 core metrics used to measure SaaS company success. Using simple examples, we’ll show you how to calculate each metric, and describe why specific indicators are important to investors.