The definition
MRR is the sum of all recurring revenue normalized to one month. A customer paying $1,200 on an annual contract contributes $100 of MRR. Nothing else counts: no one-time setup fees, no services, no usage spikes you cannot rely on next month.
The four MRR movements
Track MRR as a flow, not a snapshot: new MRR from new customers, expansion MRR from upgrades, contraction MRR from downgrades, and churned MRR from cancellations. Net new MRR is new plus expansion minus contraction minus churn. That one line tells you more about your business than the topline number.
Common mistakes
Counting one-time fees, counting trials before conversion, recognizing annual prepayments as one month of revenue, and ignoring discounts. Each inflates the number now and creates an embarrassing restatement later, usually during due diligence.
FAQ
Is MRR the same as revenue?
No. MRR is a normalized measure of recurring run rate; recognized revenue follows accounting rules. Investors want both, and want them to reconcile.
Should usage-based billing count as MRR?
Only the committed or reliably recurring floor. Many teams report a separate committed-plus-usage number and label it clearly.
What growth rate is good?
Early-stage SaaS investors typically look for 10 to 20 percent month-over-month at seed, trending to 2 to 3x annually by Series A. Context matters more than the number.