Net Monthly Recurring Revenue (Net MRR) Growth is a metric often used by subscription-based businesses, particularly in the SaaS industry, to measure the growth or expansion of monthly recurring revenue, after accounting for any churn, contractions, or downgrades in existing subscriptions.
To calculate Net MRR Growth, you first need the formula for Net MRR:
Net MRR = Starting MRR + New MRR – Lost MRR
Once you have your Net MRR, you can calculate the growth within a set period by using the below formula:
Net MRR Growth = (Net MRR for Ending Month – Net MRR for Starting Month) / Net MRR for Starting Month x 100%
In order to calculate the net monthly recurring revenue growth, you will need at least two months of data. Net MRR Growth is usually expressed as a percentage.
A new subscription box business wants to calculate their net MRR growth from the past two months. Below are the tables for the starting MRR, new MRR, upgraded MRR, churn MRR, and contraction MRR for each month.
Starting MRR | New Customers | Upgraded Customers | Churn MRR | Contraction MRR |
|---|---|---|---|---|
$10,000 | $2,000 | $500 | $1,000 | $200 |
Starting MRR | New Customers | Upgraded Customers | Churn MRR | Contraction MRR |
|---|---|---|---|---|
$11,300 | $3,000 | $700 | $600 | $400 |
First, we need to calculate the net monthly recurring revenue for each month.
August Net MRR = 10,000 + 2,000 + 500 – 1,000 – 200
August Net MRR = $11,300
September Net MRR = 11,300 + 3,000 + 700 – 600 – 400
September Net MRR = $14,000
Then we can calculate the net MRR growth between the two months:
Net MRR Growth = (14,000 – 11,300) / 14,000 x 100%
Net MRR Growth = 2,700 / 14,000 x 100%
Net MRR Growth = 0.19 x 100%
Net MRR Growth = 19%
The Net MRR Growth between August and September is 19%. This means that after accounting for new customers, upgrades, churns, and contractions, the business saw a net growth of 19% in its Monthly Recurring Revenue.
A “good” net MRR growth rate can vary depending on the stage, size, and industry of the company. However, here are some general benchmarks:
Several factors can influence the net MRR growth rate:
While these benchmarks offer a general idea, it’s essential for businesses to set their growth targets based on internal capabilities, market research, and long-term strategy. It’s also useful to compare growth rates with similar companies in the same industry or of similar size.
Increasing the Net MRR (Monthly Recurring Revenue) Growth rate is a key goal for subscription-based businesses looking to expand and improve their financial health. To achieve this, you need to focus on various strategies and tactics aimed at boosting your revenue while minimizing customer churn and contractions. Here are some ways to increase your Net MRR Growth rate:
It’s important to note that achieving significant Net MRR Growth may take time and a combination of strategies. Regularly track and assess your progress, and be prepared to adapt your approach based on the feedback and results you receive from your customers and data analysis.