Key takeaways
- Normalise every contract to a month: a $12,000 annual plan is $1,000 MRR.
- Leave out setup fees, services, free trials and unpaid pilots.
- Ask for the definition and the billing data behind any MRR figure.
How to calculate MRR
Add up the monthly value of every active recurring contract at a point in time. A customer on a $12,000 annual plan contributes $1,000; a customer paying $300 a month contributes $300. A $5,000 setup fee contributes nothing, because it does not recur.
| MRR movement | Meaning |
|---|---|
| New | From customers who started paying this month |
| Expansion | Upgrades and added seats from existing customers |
| Contraction | Downgrades from existing customers |
| Churned | Lost when customers cancel |
Checking an MRR claim
A deck says "$40k MRR". Ask for the month, whether it includes annual prepayments divided by twelve, and whether pilots are counted. Then compare it to a billing export. Delsivo's claim tracker, planned for the Pilot release, records the metric definition, period, amount, units and source, and labels the claim Founder reported until someone corroborates it.
Common confusions
- MRR versus recognised revenue: accounting revenue follows accounting rules; MRR is an operating metric.
- MRR versus bookings: a signed contract that hasn't started billing is not yet MRR for most definitions.
- Usage-based revenue needs a stated method, such as a trailing average, before it is called recurring.