How to calculate MRR
MRR is the monthly run rate of your recurring revenue. It is the heartbeat of a subscription business because it updates fast and breaks cleanly into the components that explain growth: new, expansion, contraction, and churn.
Short answer
Calculate MRR (monthly recurring revenue) by summing the normalized monthly value of every active subscription. Divide annual plans by 12, add recurring add-ons, and exclude one-time fees. Then track its movement with new, expansion, contraction, and churned MRR to understand what is really driving growth.
Step by step
Normalize every subscription to monthly
Convert annual and quarterly plans to a monthly figure so everything is comparable. An annual plan divided by 12 is its MRR contribution.
Sum active recurring revenue
Add up the monthly value of all active subscriptions plus recurring add-ons, excluding one-time charges and usage overages.
- MRR = sum of normalized monthly subscription values
- Annual plan MRR = annual price / 12
- Exclude setup fees and one-time services
Break MRR into movement types
Split the change each month into new, expansion, contraction, and churned MRR. The net movement tells the growth story.
Track net new MRR
Net new MRR equals new plus expansion minus contraction minus churn. It is the single clearest measure of monthly momentum.
Reconcile to billing
Tie MRR to active subscriptions in your billing system so it is auditable and consistent with ARR (MRR times 12).
How Ardovo helps
Ardovo derives MRR from live subscriptions and decomposes the monthly movement into new, expansion, contraction, and churn automatically, so Rook can explain exactly why MRR moved rather than just reporting the total.
Frequently asked questions
How do I handle annual plans in MRR?
Divide the annual recurring price by 12 to get its monthly contribution. MRR normalizes all billing frequencies to a monthly figure so plans of different terms are directly comparable and roll up cleanly to ARR.
What is net new MRR?
Net new MRR is new plus expansion MRR minus contraction and churned MRR in a period. It is the truest single measure of monthly momentum because it nets growth against losses instead of showing only gross additions.
What is the relationship between MRR and ARR?
ARR is simply MRR multiplied by 12. MRR is the more granular, faster-moving view; ARR is the annualized headline. They should always tie out, and both exclude one-time, non-recurring revenue.