Formula
MRR = Σ recurring line items live at month end line item = (unit price × quantity − discount) ÷ months in billing interval
Worked example
Illustrative figures. One customer contract with three lines.
| Line | USD |
|---|---|
| Platform licence, $36,000 a year | 3,000 |
| 25 seats at $40 a month, less 10% | 900 |
| Implementation fee, $8,000 once(not MRR) | – |
| MRR | 3,900 |
What counts as MRR
- Subscription and licence fees, after discounts.
- Annual, quarterly and multi-year fees, divided into a monthly amount.
- Recurring platform or support fees that renew with the contract.
MRR should describe the revenue you can expect next month if nothing changes. That means recurring charges from contracts that are live on the measurement date, at the price the customer actually pays.
What does not
- One-time fees such as implementation, onboarding and training.
- Usage and overage charges that vary from month to month.
- Trials. They are pipeline until the contract goes live.
- Signed contracts that have not started yet. They are backlog and belong in contracted ARR.
- Contracts that ended or were cancelled before the measurement date.
Build it from contracts, not invoices
Invoices tell you when you bill, not what you earn each month. A customer on an annual plan is invoiced once a year, so MRR built from invoices jumps in the renewal month and drops to nothing for the next eleven.
Building MRR from contract line items and their service dates avoids that. It also works the same way whether you bill through Stripe, Xero, QuickBooks or NetSuite.
Pick one measurement date
Measure MRR on the same day every month. The last day of the month lines MRR up with the month-end close and the board pack. Measuring on different days in different months creates movements that are only timing.
How Revnewed calculates it
Each recurring line item contributes unit price × quantity, less a percentage discount per unit or a fixed discount per line, divided by 12 for annual items. One-time, usage and metered lines are not MRR.
A line counts at a month end when its own start and end dates cover that day and the contract is earning revenue. Trialing contracts never count. Paused contracts count until the day before the pause, and cancelled contracts until the cancellation took effect.
Months are calendar months in UTC and MRR is measured on the last day. History comes from dated facts, so pausing or cancelling a contract today never rewrites past months.
Common mistakes
- Annual invoices counted in one month
- A $36,000 annual invoice is $3,000 of MRR for twelve months, not $36,000 in the month it was sent.
- Implementation fees in the run rate
- Set-up and services revenue does not recur. Including it inflates MRR in the months you sign deals and creates false churn afterwards.
- List price instead of contract price
- MRR is what the customer pays. Apply per-unit and per-line discounts before normalising.
- Trials counted as revenue
- A trial at list price is a forecast. Count it when the contract is live.