How to calculate MRR growth rate
MRR growth rate is the pulse of a subscription business, showing how fast recurring revenue is expanding month to month. Because it updates continuously, it is the growth metric operators watch most closely.
Small monthly growth compounds into large annual gains, so the rate matters more than it appears. A steady 8 percent monthly growth more than doubles MRR over a year.
- (This - last) / last The formula
- Compounds Monthly gains stack up
- Net new MRR The driver underneath
Short answer
MRR growth rate is the month-over-month percentage change in monthly recurring revenue. Subtract last month's MRR from this month's, divide by last month's, and multiply by 100. If MRR went from 200,000 to 220,000 dollars, growth is 10 percent. Sustained monthly growth compounds quickly, so track it consistently and annualize with care.
Step by step
Take two consecutive months of MRR
Use this month's MRR and last month's MRR, both computed consistently.
Compute the change
Subtract last month's MRR from this month's to get net new MRR for the month.
Divide by last month
MRR growth rate equals net new MRR divided by last month's MRR, times 100.
Annualize by compounding
Do not multiply the monthly rate by 12. Compound it: annual growth equals (1 plus the monthly rate) to the 12th power, minus 1.
Worked example
Last month MRR was 250,000 dollars; this month it is 275,000 dollars. Net new MRR is 25,000 dollars, so MRR growth rate = 25,000 / 250,000 = 10 percent for the month.
Compounded, sustaining 10 percent monthly growth for a year multiplies MRR by (1.10) to the 12th power, about 3.14 times, far more than the naive 120 percent that multiplying 10 percent by 12 would suggest. Compounding is powerful.
How Ardovo handles it
Ardovo tracks MRR growth rate and its net new MRR driver in real time, correctly compounded when annualized. Rook flags when growth decelerates and shows whether the cause is slowing new business or rising churn.
Frequently asked questions
What is the MRR growth rate formula?
This month's MRR minus last month's MRR, divided by last month's MRR, times 100. It is the month-over-month percentage change in recurring revenue, driven by net new MRR.
How do I annualize MRR growth rate?
Compound it rather than multiplying by 12. Annual growth equals (1 plus the monthly rate) raised to the 12th power, minus 1. A 10 percent monthly rate compounds to roughly 214 percent annually, not 120 percent.
What drives MRR growth rate?
Net new MRR: new plus expansion minus churn and contraction. Decomposing growth into these components shows whether it comes from new customers, expansion, or reduced churn, which matters as much as the headline rate.