# MRR (monthly recurring revenue)

> MRR, or monthly recurring revenue, is the predictable subscription revenue a company expects to receive each month, with every active recurring contract converted to a monthly amount. It leaves out one-off fees, services and unusual usage spikes. Investors break MRR movements into new, expansion, contraction and churned MRR to see what is driving growth.

Source: https://delsivo.com/glossary/mrr · Updated 2026-11-06

## 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](https://delsivo.com/claims-and-evidence), 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.

## Frequently asked questions

### Should annual contracts count in MRR?

Yes, divided by twelve. Count the monthly equivalent, not the full payment in the month it arrived.

### Do free trials or pilots count towards MRR?

Not usually. Unpaid pilots and free trials have no recurring revenue until they convert to paid contracts.

### How does MRR relate to ARR?

ARR is usually MRR multiplied by 12, for businesses where the monthly figure is representative.

## Related pages

- [ARR](https://delsivo.com/glossary/arr)
- [Net revenue retention](https://delsivo.com/glossary/net-revenue-retention)
- [How to verify startup traction](https://delsivo.com/how-to-verify-startup-traction)
- [Claims and evidence](https://delsivo.com/claims-and-evidence)