MRR and ARR turn subscriptions into a comparable run rate
Monthly recurring revenue normalizes active subscriptions into one month. Annual recurring revenue multiplies that monthly run rate by 12. Together they make recurring revenue easier to compare across billing intervals and reporting periods.
How to calculate recurring revenue
- Starting MRR: active subscribers × average monthly recurring revenue per subscriber.
- Ending MRR: starting MRR + expansion MRR − contraction and churned MRR.
- Ending ARR: ending MRR × 12.
Normalize annual and quarterly plans into monthly values before adding them. Exclude setup fees, consulting, hardware, and other one-time revenue so the result remains a recurring run rate.
Use the run rate with context
ARR is a snapshot, not a promise. Review new MRR, expansion, contraction, and churn separately to understand why the total moved. Pair billing metrics with acquisition and retention behavior to find the product experiences that create durable recurring growth.