Definitions
MRR (monthly recurring revenue) is the subscription revenue you can expect every month, normalized to one month. ARR (annual recurring revenue) is the same thing over a year. For a subscription business, ARR = MRR × 12.
How to calculate MRR
Add up what every active subscription is worth per month:
- Monthly plans count at their monthly price.
- Yearly plans count at one twelfth of the yearly price. A $120/year plan adds $10 of MRR.
- Apply discounts that customers actually pay.
- Multiply by quantity for per-seat plans.
Leave out:
- One-time purchases, setup fees and lifetime deals.
- Usage-based charges that vary each month (track them separately).
- Taxes collected on top of the price.
- Cancelled subscriptions. Decide whether they leave your MRR when the customer cancels or when the paid period ends, and stick to that rule.
A common mistake is counting a yearly payment as MRR in the month it’s received. That creates a fake spike, then eleven quiet months.
A worked example
A small SaaS with four kinds of customers at the end of the month:
| Customers | Plan | MRR |
|---|---|---|
| 40 | $19/month | $760 |
| 10 | $190/year (÷ 12 = $15.83) | $158.30 |
| 3 | Team plan, 5 seats × $12/month | $180 |
| 5 | $19/month with 20% off | $76 |
MRR = $1,174.30, so ARR = $14,091.60. A $99 one-time template sold the same month doesn’t change either number.
Which one to use
- MRR for early-stage products, monthly plans and month-to-month tracking. It reacts quickly, so you see the effect of a launch or a price change.
- ARR for businesses sold mostly on yearly contracts, and in conversations with investors or buyers who think in yearly terms.
Which one to share publicly
For indie founders building in public, MRR is the norm: “$5K MRR” is instantly understood, and milestones ($1K, $10K) are usually expressed in MRR. Quoting ARR when MRR is small can look like inflating the number, because readers do the division.
Whatever you pick, stay consistent from one update to the next, and say which one it is. If you’d rather not share either, growth percentages work too: see how to share MRR without showing the amount.
Get the number right automatically
Payment providers compute MRR differently, and spreadsheets drift. MotionMRR reads it from Stripe, Lemon Squeezy and other providers with a read-only key and turns the curve into a video you can post. Want to project it forward? Use the MRR growth calculator.