MRR Growth Rate
Date created: Oct 12, 2022 • Last updated: Oct 12, 2022
What is MRR Growth Rate?
Monthly Recurring Revenue (MRR) Growth Rate is the velocity at which MRR is being added to the business, expressed as a percentage. MRR Growth Rate is often cited as a monthly rate, but it's also possible to express it using an annual timeframe; for example, "we are targeting 10% MRR Growth for April", or "our MRR Growth Rate was 100% last year".
MRR Growth Rate Formula
How to calculate MRR Growth Rate
A recurring revenue business increased its MRR from $250K at the beginning of the month to $265K at the end of the month. (Total MRR end of period - Total MRR beginning of period) / (Total MRR beginning of period) Net MRR Growth = MRR at the end of the period - MRR at the beginning of the period = $15K $15K / $250K = 6% MRR Growth Rate per month
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What is a good MRR Growth Rate benchmark?
According to the KeyBanc 2019 SaaS Survey, the average annual MRR Growth Rate across all companies surveyed was 52%. However, it depends on the stage of the business: at the earlier stages, a higher growth rate is a better indicator than a lower one, but it's hard to expect a company with a higher MRR to grow at the same levels.
MRR Growth Rate benchmarks
How to visualize MRR Growth Rate?
Growth Rates are best visualized with line charts. This lets you identify where your MRR Growth Rate has increased or decreased, allowing you to act on discrepancies.
MRR Growth Rate visualization example
MRR Growth Rate
ChartMeasuring MRR Growth Rate
More about MRR Growth Rate
Monthly Recurring Revenue (MRR) is the total amount of recurring revenue generated by a subscription-based business each month. The change in MRR compared to a previous period in time gives the MRR Growth Rate.
MRR Growth Rate measured over time helps you track the rate at which your business is growing, and lets you rectify slow growth or drawn-out declines in growth. To improve your MRR Growth Rate, it is helpful to focus on acquisition along with other factors such as retention, expansion, and pricing.
The change in MRR in any given month expressed as a percentage is MRR growth rate. The change in MRR refers to the starting MRR for that given month +new customer MRR +expansion MRR -churned MRR. Acquisition of new customers increases the new customer MRR and therefore increases the growth rate if the speed at which you acquire new customers increases.
Businesses use this metric to understand how quickly the business is growing from a revenue perspective. For venture backed companies, it is particularly important since you're trying to raise new rounds at higher valuations every 18-24 months in the early stages. Technically your valuation should be a function of your revenue (although this isn't always true) and therefore you want to be growing MRR quickly to keep on pace with valuations for the next round of fundraising. A more simplified explanation is just to show investors that the company has the ability to quickly scale.
MRR Growth Rate Frequently Asked Questions
What other elements are looked at in relation to MRR and MRR Growth Rate?
Investors may often look at this number in relation to the churn rate and customer count. Looking to understand if the MRR Growth was through the expansion within existing customers or if there were new customers on-boarded as well.