Monthly Recurring Revenue (MRR): What is it and why does it matter?
What Is MRR (Monthly Recurring Revenue)?
MRR represents the predictable, recurring income your business generates each month, excluding any one-time charges or variable fees.
Commonly used by subscription-based models like SaaS (Software as a Service), MRR simplifies how you track short-term growth trends and revenue stability.
For instance, if your monthly subscription costs £100 and you have 100 subscribers, then your MRR is £10,000. (You can also use this data to calculate Annual Recurring Revenue or "ARR") by simply multiplying by 12 (for 12 months). So £10,000 MRR x 12 months = £120,000 ARR.
Why Does MRR Matter to Startup Investors?
- Predictability: Investors love consistent revenue streams. By showing a dependable MRR, you demonstrate the stability needed to drive confidence in your startup valuations.
- Scalability: MRR highlights growth potential on a monthly basis. If your subscriber base or contract renewals keep rising, your valuation will likely follow suit.
- Benchmarking: MRR serves as a basis for revenue multiples—one of the most popular methods for evaluating startup valuations. By applying a suitable revenue multiple to your MRR, you can gauge what your business might be worth in the eyes of potential investors.
How Do You Calculate MRR Correctly?
- Exclude One-Time Sales
MRR should only include truly recurring revenue. One-off fees or project-based income can inflate your figures and mislead investors.
- Consider Churn
Keep tabs on cancellations or non-renewals. Investors look closely at churn rates to ensure your MRR remains healthy over time.
- Account for Upgrades and Downgrades
If customers frequently change their subscription plans, factor that into your MRR to present an accurate snapshot of month-to-month growth.
How Do You Present MRR in a Pitch Deck to Raise Investment?
A compelling pitch deck is the backbone of your funding round. For a SaaS business, investors will expect clear insight into your MRR, including its growth rate and any factors influencing month-to-month changes.
If you’re unsure how best to showcase your MRR, our Pitch Deck Creation Services at PitchBuilder can help you build a deck that highlights your recurring revenue story in the most persuasive way.
