What is MRR Renewal Rate?Monthly Recurring Revenue (MRR) Renewal Rate is the percentage of MRR retained from existing customers, calculated using expansion MRR, downgrades, and cancels.
In a SaaS business, an MRR Renewal Rate >100% is a growth indicator.
How to calculate MRR Renewal Rate
ƒ Sum(renewing customers MRR) / Sum(total MRR of customers due to renew)
Date created: Apr 28, 2018
Latest update: Aug 12, 2019
Tell me more about this metric
MRR Renewal Rate is calculated by dividing the MRR for renewing customers by the total MRR of customers due to renew.
Retaining customers is a key for operating a healthy and profitable business. A high renewal rate is an indication that your offering represents a strong value proposition for your customers.
And, it’s also an important component of profitability. Acquiring a new customer can average 2 to 7 times more costly than retaining an existing customer.
For a comprehensive understanding of renewals, it’s important to track both the percentage of all customers who renew contracts, and the percentage of all revenue dollars under contract which renew.
Example A: A company has 100 customers paying $24,000 for annual subscriptions ($2,000 MRR). 10 customers are due for renewal, however only 7 actually renew. The MRR Renewal Rate is
($2,000 MRR x 7) / ($2,000 MRR x 10) = $14,000 / $20,000 = 70.0%
Example B: A company has 100 customers paying $24,000 for annual subscriptions ($2,000 MRR). 10 customers are due for renewal, only 9 actually renew, but 1 of these adds a $3000 MRR upgrade. The MRR Renewal Rate is
($2,000 MRR x 9) + ($3,000 x 1) / ($2,000 MRR x 10) = $21,000 / $20,000 = 105.0%