Terms

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is the predictable, recurring income a business expects to receive from all active customer subscriptions in a given month. By normalizing revenue from various subscription terms into a single figure—including recurring add-ons and discounts but excluding one-time fees—it provides a clear view of a company's financial health and growth trajectory.

Importance of MRR in Business Growth

MRR is a critical metric for subscription companies, serving as a key indicator of financial health and momentum. It offers a clear view of whether revenue is growing or shrinking month-over-month. This allows businesses to accurately gauge their performance and growth trajectory.

This predictable revenue is essential for strategic planning and forecasting. It informs crucial decisions on budgeting, resource allocation, and expansion efforts like hiring or marketing. By providing financial clarity, MRR empowers companies to pursue sustainable growth.

Strategies to Increase MRR

Boosting MRR is crucial for sustainable growth. It involves a multi-faceted approach that focuses on both acquiring new customers and maximizing value from existing ones. Key strategies often revolve around pricing, customer satisfaction, and expansion opportunities.

  • Pricing: Optimize your pricing strategy through market research and testing to better align with customer value.
  • Acquisition: Expand your customer base with targeted marketing campaigns and referral incentives to attract new subscribers.
  • Retention: Improve customer service and product value to reduce churn and keep existing customers satisfied.
  • Expansion: Encourage upgrades, cross-sells, and add-ons to increase the revenue from your current customer base.

Monthly Recurring Revenue (MRR) vs. Annual Recurring Revenue (ARR)

MRR and ARR both measure recurring revenue but differ significantly in their time frame and strategic application.

  • MRR: This metric offers a granular, month-to-month view of revenue, ideal for short-term forecasting and operational agility. It provides timely insights valuable for mid-market companies to track momentum and make quick adjustments, though it can obscure long-term trends.
  • ARR: This metric provides a macro, annualized perspective on revenue, suited for long-term strategic planning and high-level reporting. Enterprises often favor ARR for its stability in investor communications, though it can mask the monthly fluctuations that MRR highlights.

Common Challenges in Managing MRR

Managing MRR effectively presents several hurdles for subscription businesses. Inaccurate calculations and customer churn can distort financial reality, making it difficult to plan for sustainable growth. Key challenges often stem from data complexity and revenue volatility.

  • Calculation: Misinterpreting annual contracts, one-time fees, or discounts leads to skewed revenue figures.
  • Churn: Losing customers through cancellations or downgrades directly erodes the recurring revenue base.
  • Complexity: Tracking various MRR types like new, expansion, and contraction requires granular data management.

Analyzing MRR Trends and Patterns

Analyzing MRR trends reveals the underlying drivers of revenue changes, guiding strategic decisions.

  • Growth: Indicates successful customer acquisition and upgrades.
  • Decline: Signals rising customer churn or downgrades.
  • Insights: Provides data for accurate financial forecasting and planning.

Frequently Asked Questions about Monthly Recurring Revenue (MRR)

How are one-time fees and setup charges handled in MRR calculations?

One-time fees, such as setup or implementation charges, are excluded from MRR calculations. MRR only tracks predictable, recurring revenue to provide a consistent measure of a company's ongoing financial health and growth momentum.

How do discounts and promotions impact MRR?

Discounts and promotions are factored directly into MRR calculations. The recurring revenue from a customer is counted net of any discounts, reflecting the actual cash expected each month and providing a more accurate picture of financial performance.

Can MRR go down even if we add new customers?

Yes, your total MRR can decrease if the revenue lost from customer churn and downgrades is greater than the revenue gained from new customers and upgrades. This is known as negative net MRR and signals a contraction.

Other terms

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Touchpoints

A touchpoint is any time a potential or existing customer comes in contact with your brand, from seeing an ad to receiving an email.

Touchpoints

Sales Partnerships

Sales partnerships are strategic alliances where two companies co-sell products to expand their reach, generate new leads, and increase revenue.

Sales Partnerships

B2B Demand Generation

Learn about B2B demand generation, including strategies for effective B2B demand generation, & key components of a demand generation program.

B2B Demand Generation

Sales Objections

Sales objections are reasons or concerns raised by a potential customer as to why they are hesitant or unwilling to make a purchase.

Sales Objections

B2B Marketing KPIs

Learn about B2B marketing KPIs, including identifying key B2B marketing KPIs, setting achievable KPI targets, B2B vs B2C marketing KPIs: understanding the differences.

B2B Marketing KPIs

Average Order Value

Average Order Value (AOV) tracks the average dollar amount spent each time a customer places an order on your website or mobile app.

Average Order Value

Product-Market Fit

Product-market fit is when a product meets the needs of a strong market, leading to high demand, customer satisfaction, and organic growth.

Product-Market Fit

Data Encryption

Data encryption translates data into another form, or code, so that only people with access to a secret key or password can read it.

Data Encryption

Copyright Compliance

Copyright compliance is adhering to laws that protect creative works. It involves legally using content by obtaining permission or licenses.

Copyright Compliance

Total Audience Measurement

Total Audience Measurement (TAM) provides a holistic view of content consumption, tracking viewership across all platforms and devices.

Total Audience Measurement

Zero-Based Budgeting (ZBB)

Zero-based budgeting (ZBB) is a method where all expenses are re-evaluated and must be justified from scratch for each new budget period.

Zero-Based Budgeting (ZBB)

Docker

Docker is a tool that packages applications and their dependencies into isolated environments called containers for easy deployment and scaling.

Docker

Brand Loyalty

Learn about brand loyalty, including how to build brand loyalty, benefits of brand loyalty, measuring brand loyalty, & strategies for increasing loyalty.

Brand Loyalty

Demographic Segmentation in Marketing

Demographic segmentation divides a market into groups based on traits like age, gender, and income, allowing for more targeted marketing efforts.

Demographic Segmentation in Marketing

Mobile App Analytics

Mobile app analytics involves collecting and analyzing data from mobile apps to understand user behavior and optimize the app's performance.

Mobile App Analytics

Sales Playbook

A sales playbook is a guide that outlines your sales process, best practices, and tools to help reps sell more efficiently and consistently.

Sales Playbook

Site Retargeting

Site retargeting is a marketing strategy that shows ads to people who have previously visited your website but left without converting.

Site Retargeting

Bounce Rate

Learn about bounce rate, including understanding bounce rate implications, key factors affecting bounce rate, & reducing your bounce rate effectively.

Bounce Rate

Channel Marketing

Channel marketing is a strategy where a company sells its products or services through third-party partners, like resellers or affiliates.

Channel Marketing

Analytics Platforms

Analytics platforms are tools that collect and analyze data from various sources, helping businesses track key metrics and make informed decisions.

Analytics Platforms

Email Verification

Email verification is the process of confirming that an email address is valid and deliverable, which helps improve campaign performance.

Email Verification

Unique Value Proposition (UVP)

A Unique Value Proposition (UVP) is a concise statement that clearly communicates the unique benefit a customer gets from your product or service.

Unique Value Proposition (UVP)

Drupal

Drupal is a free, open-source content management system (CMS) for building websites and applications. It's known for its robust flexibility.

Drupal

Content Syndication

Content syndication is the process of republishing your web content on third-party sites to reach a much wider audience.

Content Syndication

Custom Metadata Types

Custom Metadata Types store application configurations as metadata. This makes them easily deployable between different Salesforce environments.

Custom Metadata Types

Direct Mail

Direct mail is a marketing method where businesses send physical promotional materials directly to potential customers' mailboxes.

Direct Mail

DevOps

DevOps is a culture and set of practices that merges software development (Dev) and IT operations (Ops) to shorten development cycles.

DevOps

Subject Matter Expert

A Subject Matter Expert (SME) is an individual with profound knowledge and authority in a particular area, topic, or industry.

Subject Matter Expert

Sales Forecast Accuracy

Sales forecast accuracy is a key metric that compares your predicted sales revenue against the actual sales revenue you ultimately achieve.

Sales Forecast Accuracy

Sales Enablement Content

Sales enablement content refers to the materials and tools that empower your sales team to engage prospects and close deals more efficiently.

Sales Enablement Content

Batch Processing

Learn about batch processing, including benefits of batch processing, best practices for implementation, & common use cases.

Batch Processing

Scalability

Scalability is a company's ability to handle increased workloads or market demands without a drop in performance or a spike in costs.

Scalability

Performance Monitoring

Performance monitoring involves collecting and analyzing data to track a system's operational health and efficiency, ensuring it meets set standards.

Performance Monitoring

Multi-threading

Multi-threading allows a single CPU core to run multiple independent threads (or tasks) at the same time, boosting efficiency and performance.

Multi-threading

Clustering

Clustering is the technique of grouping similar items. In sales, it means segmenting leads by shared traits to better personalize outreach.

Clustering

Ad-hoc Reporting

Ad-hoc reporting is the creation of one-off reports to answer specific business questions as they arise, providing instant, targeted insights.

Ad-hoc Reporting

Objection

An objection is an explicit expression by a prospect that presents a barrier to moving forward in the sales process.

Objection

Affiliate Marketing

Affiliate marketing is a performance-based model where affiliates earn a commission for promoting another company’s products or services.

Affiliate Marketing

CI/CD

CI/CD, or Continuous Integration/Continuous Delivery, automates software builds, tests, and deployments for faster, more reliable releases.

CI/CD

Sales Pipeline Management

Sales pipeline management is the process of organizing, tracking, and managing potential deals through every stage of your sales funnel.

Sales Pipeline Management

Customer Relationship Marketing

Customer relationship marketing is a strategy for building lasting connections with customers to foster long-term loyalty and engagement.

Customer Relationship Marketing

Sender Policy Framework

Sender Policy Framework (SPF) is an email authentication method that lets you specify which mail servers can send emails on behalf of your domain.

Sender Policy Framework

Sales Pipeline

A sales pipeline is a visual representation of where prospects are in the sales process, from the first contact to the final sale.

Sales Pipeline

Serviceable Obtainable Market

Serviceable Obtainable Market (SOM) is the portion of the market you can realistically capture with your current resources, sales, and marketing.

Serviceable Obtainable Market

CDP

A Customer Data Platform (CDP) is software that gathers and organizes customer data from various touchpoints into a single, unified profile.

CDP

Persona Map

A persona map visually outlines a target customer, detailing their goals, behaviors, and pain points to help your team build genuine empathy.

Persona Map

Purchase Buying Stage

The purchase stage is when a buyer has decided on a solution and is ready to buy. They're comparing vendors to make a final choice.

Purchase Buying Stage

Triggered Email

A triggered email is an automated message sent to a user in response to a specific action or event, like signing up or making a purchase.

Triggered Email

PPC

Pay-per-click (PPC) is an internet advertising model where businesses pay a fee each time one of their online ads is clicked by a user.

PPC

Affiliate Networks

Affiliate networks are platforms that act as intermediaries between publishers (affiliates) and merchant affiliate programs.

Affiliate Networks

Time on Site

Time on site, or session duration, is a key web metric that tracks the total time a visitor spends on your website during a single visit.

Time on Site

Order Management

Order management is the end-to-end process of tracking customer orders from placement to fulfillment, ensuring a seamless customer experience.

Order Management

Hybrid Sales Model

A hybrid sales model blends traditional and digital sales methods to engage customers across multiple channels and buying preferences.

Hybrid Sales Model

Analytical CRM

Analytical CRM analyzes customer data to uncover actionable insights, helping businesses make smarter decisions and improve customer interactions.

Analytical CRM

Salesforce Administrator

A Salesforce Administrator is a certified professional who manages and customizes the Salesforce platform to meet a company's specific business needs.

Salesforce Administrator

B2B Marketing Attribution

Learn about B2B marketing attribution, including challenges in B2B marketing attribution, & key metrics for effective attribution.

B2B Marketing Attribution

Employee Engagement

Employee engagement is the emotional commitment an employee has to their organization, motivating them to contribute to the company's success.

Employee Engagement

Sales Operations Analytics

Sales operations analytics is the practice of analyzing sales data to improve the efficiency and effectiveness of the entire sales process.

Sales Operations Analytics

Email Engagement

Email engagement measures how your audience interacts with your emails. It includes key actions like opens, clicks, replies, and forwards.

Email Engagement

Closed Lost

Closed Lost is a sales term for a deal that didn't go through. The prospect decided not to buy, or the sales team disqualified them.

Closed Lost

Field Sales Rep

A field sales representative, or outside sales rep, travels to meet prospects in person, selling products or services directly within their territory.

Field Sales Rep

Lead Qualification Process

The lead qualification process is how you determine which prospects are most likely to become customers by evaluating them against specific criteria.

Lead Qualification Process

Self-Service SaaS Model

The self-service SaaS model allows customers to independently sign up, use, and manage a product without any direct help from the company.

Self-Service SaaS Model

Marketing Play

A marketing play is a repeatable tactic used to achieve a specific marketing goal, like generating leads or driving engagement.

Marketing Play

Soft Sell

A soft sell is a low-pressure sales tactic that uses subtle persuasion and relationship-building to gently guide customers toward a purchase.

Soft Sell

Sales Forecast

A sales forecast is a projection of future sales revenue. It's a crucial tool for businesses to make informed decisions and allocate resources.

Sales Forecast

Lead Scoring

Lead scoring is the process of assigning points to leads based on their attributes and actions to determine their sales-readiness.

Lead Scoring

Sales Funnel Metrics

Sales funnel metrics are key data points that track how effectively you're moving potential customers from awareness to a final purchase.

Sales Funnel Metrics

Value-Added Reseller

A Value-Added Reseller (VAR) is a company that adds features or services to an existing product, then resells it as an integrated solution.

Value-Added Reseller

Drip Campaign

A drip campaign is a series of automated messages sent to prospects or customers over time to nurture leads and drive engagement.

Drip Campaign

Operational CRM

An Operational CRM is a system that automates and improves customer-facing business processes like sales, marketing, and customer service.

Operational CRM

Signaling

Signaling is using credible actions to convey information about quality or intent to a less-informed party, effectively building trust.

Signaling

Return on Investment (ROI)

Return on Investment (ROI) is a key performance metric that measures the profitability of an investment relative to its initial cost.

Return on Investment (ROI)

Sales Velocity

Sales velocity is a key metric measuring the speed at which your company makes money. It shows how fast deals move through your sales pipeline.

Sales Velocity

Price Optimization

Price optimization is the process of finding the ideal price for a product or service to maximize profitability or other business objectives.

Price Optimization

Lightning Components

Lightning Components is a UI framework for building dynamic web apps for mobile and desktop devices on the Salesforce Lightning Platform.

Lightning Components

Call for Proposal

A Call for Proposal (CFP) is a document that solicits proposals, often through a bidding process, for a specific project or service.

Call for Proposal

Digital Advertising

Digital advertising is the practice of delivering promotional content to users through various online and digital channels like social media or search engines.

Digital Advertising

User Interface

A User Interface (UI) is the point where humans and computers interact. It encompasses all visual elements like screens, icons, and buttons.

User Interface

80/20 Rule

The 80/20 rule, or Pareto Principle, posits that 80% of results come from just 20% of the effort. It's a key concept for prioritization.

80/20 Rule

Digital Analytics

Digital analytics is the analysis of data from digital channels to understand user behavior and optimize online experiences for business goals.

Digital Analytics

Dynamic Territories

Dynamic territories are fluid sales assignments that adjust based on real-time data, ensuring reps can focus on the highest-value accounts.

Dynamic Territories

Account Match Rate

Account match rate is the percentage of target accounts successfully identified and matched against a specific database or data provider.

Account Match Rate

Cloud-based CRM

A cloud-based CRM is a customer relationship management tool hosted online, letting teams access and manage customer data from anywhere.

Cloud-based CRM

Sales Key Performance Indicators

Sales Key Performance Indicators (KPIs) are quantifiable metrics used to measure how effectively a sales team is achieving its key objectives.

Sales Key Performance Indicators

Tire-Kicker

A tire-kicker is a prospect who shows interest in a product but has no intention of buying, wasting a salesperson's time and resources.

Tire-Kicker

Ramp Up Time

Ramp-up time is the period a new hire takes to get fully up to speed and become a productive member of your go-to-market team.

Ramp Up Time

Bad Leads

Learn about bad leads, including identifying bad leads, warning signs of bad leads, impact of bad leads on sales, & strategies to minimize bad leads.

Bad Leads

Digital Strategy

A digital strategy outlines how your business will use online channels, data, and technology to achieve its goals and connect with customers.

Digital Strategy

Robotic Process Automation

Robotic Process Automation (RPA) uses software bots to mimic human actions and automate repetitive, rules-based tasks on digital systems.

Robotic Process Automation

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total cost a business spends to gain a new customer. It includes all sales and marketing expenses.

Customer Acquisition Cost

Lead Scrape

Lead scraping is the process of automatically extracting contact information and other relevant data about potential customers from online sources.

Lead Scrape

B2B Sales Channels

Learn about B2B sales channels, including types of B2B sales channels, strategies for effective channel selection, & integrating technology in B2B sales.

B2B Sales Channels

Marketing Automation

Marketing automation uses software to automate repetitive marketing tasks, such as email marketing, social media posting, and ad campaigns.

Marketing Automation

Content Curation

Content curation involves gathering, organizing, and sharing the most relevant online content on a specific topic for a particular audience.

Content Curation

Customer Buying Signals

Customer buying signals are the actions, behaviors, or statements a prospect makes that indicate they are moving towards a purchase decision.

Customer Buying Signals

Competitive Advantage

A competitive advantage is a unique edge that allows a business to produce goods or services better or more cheaply than its rivals.

Competitive Advantage

Intent leads

Intent leads are prospects who show buying signals through their online actions, indicating they're actively looking to make a purchase.

Intent leads

B2B Marketing Analytics

Learn about B2B marketing analytics, including key components of B2B marketing analytics, & getting started with B2B marketing analytics.

B2B Marketing Analytics

AI-Powered Marketing

AI marketing uses artificial intelligence to analyze data, automate decisions, and deliver personalized customer experiences at scale.

AI-Powered Marketing