Breaking Down MRR: How to Measure and Boost Your SaaS Revenue

Monthly Recurring Revenue (MRR) often determines revenue growth. MRR is a way to measure steady, subscription-based income, which is important for long-term success and growth. But businesses can make a lot more money by strategically optimizing MRR instead of just keeping track of it.

What does MRR mean?

Monthly recurring revenue (MRR) is the steady, recurring income that your customers bring in every month. Like one-time or nonrecurring income, MRR gives you a clear picture of how your business is doing financially and how predictable it is.

Important Parts of MRR:

New MRR: The amount of money made from new customers you got during the month.

Upselling or cross-selling to current customers can increase revenue, a strategy known as expansion MRR.

The amount of money lost because of subscription cancellations or downgrades is called churned MRR.

Net New MRR is the difference between churned MRR and the sum of new MRR and expansion MRR.

By understanding these parts, you can find growth opportunities and areas that need work, like lowering customer turnover or boosting upgrades.

What does MRR do to help sales grow?

MRR isn’t just a number; it’s a powerful way to boost growth. Total revenue includes all types of income, such as one-time fees and services, but MRR only looks at recurring revenue. This makes it a great measurement for
Predicting Trends in Revenue: MRR is a very accurate way to predict future earnings.

Setting Growth Goals: Set attainable goals for getting new customers, keeping old ones, and selling more to them.

Attracting Investors: MRR shows steady streams of income, which makes your business more appealing to stakeholders.
In short, MRR sets the stage for a long-term revenue model.

Ways to Make MRR Better
Increasing MRR requires a mix of strategies for getting new customers, keeping old ones, and growing the business. Here’s how to use MRR to get the most money from SaaS:

1. Drive to get new customers
Your sales and marketing should focus on getting high-value customers who are likely to sign up for more expensive plans. Find the group of customers with the highest lifetime value using MRR data, and then make your campaigns fit those groups.

For instance, if medium-sized businesses account for the majority of your sales, you should work even harder to reach them with customized ads or sales pitches.

2. Make it easier to keep customers
Churned MRR, or the money you lose when you cancel subscriptions, poses a significant challenge for growth.

To cut down on churn:

Proactive Support: Help customers reach their goals by giving them excellent onboarding and ongoing support.

Offer alternatives, like pausing a subscription or switching to a lower-tier plan, so you don’t lose the customer completely.

Get Feedback: Poll your customers on a regular basis to find problems before they cause cancellations.

Keeping customers is crucial, as acquiring new ones can be significantly more expensive than maintaining existing ones. Additionally, the customers you retain often serve as sources of additional revenue.

3. Get the highest expansion. MRR

Existing customers who buy add-ons or upgrade to higher-level plans bring in more MRR. To encourage this behaviour, consider the following strategies:

Selling more: Show that the paid features that solve specific customer problems are worth the money.

Cross-selling means offering related goods or services that make the customer’s experience better.

Groups: Offering packages that combine features or services at a discount can encourage customers to spend more.

For example, if a customer is on a basic plan, you could offer them a bundle with advanced analytics or priority support at a price that makes sense for them.


4. Try out different ways of setting prices.
A well-thought-out pricing strategy can raise MRR by a large amount. Think about choices like:

Set different prices for each plan based on the value and features they offer.

Pay-per-use: Customers can afford your service if you charge by usage.

Freemium models: Provide basic features at no cost to entice users to sign up and gradually encourage them to pay for additional features.

Review and change your prices often to keep up with market trends and customer needs.

How to Use MRR to Make Predictions About Money
In addition to tracking the present, MRR is a great way to predict the future.

Do these things with it:

Plan your resources: Plan for cash flow and set aside money for things like marketing, hiring, and product development.

Set goals every year: To find Annual Recurring Revenue (ARR), which is a key metric for long-term planning, multiply MRR by 12.

Monitor Trends: Monitor the monthly growth rates in MRR to assess the effectiveness of your strategies.

You may need to change how you get new customers or keep old ones if your MRR growth is stable.

Tools and software for tracking MRR are available.

Tracking MRR by hand can take a lot of time and lead to mistakes. Luckily, there are many tools that can automate this process and give you real-time information about your recurring revenue. Platforms such as Stripe,

Chargebee, and Baremetrics allow you to automatically calculate new, expansion, and churned monthly revenue.

Find trends and strange things.
Make reports for your own use or to show to investors.
Automation makes sure you have the correct data so you can quickly make decisions based on it.

Effects of MRR Strategies in the Real World
Think about a SaaS company that focused on expanding MRR and used an aggressive upselling strategy. Their average revenue per account (ARPA) went up by 20% when they added more advanced features to a premium plan.

At the same time, they cut down on churned MRR by giving customers flexible downgrade options. This led to a 25% increase in net MRR over six months.
These kinds of success stories show that optimizing MRR can lead to huge sales increases.
Focusing on MRR isn’t a choice in the competitive SaaS world; it’s a must. You can build a stable revenue base and drive growth by understanding its components and strategically optimizing acquisition, retention, and expansion. Start using MRR right away to help your business reach its full potential and be successful in the long run.

Whether you’re a new business or an old one, mastering MRR strategies is the key to growth. What are you going to do now? Look closely at your metrics to find chances and begin constructing a future of steady growth.

Did you know that HubSpot can help you measure MRR?
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