MRR Growth
What is MRR Growth?
MRR Growth (Monthly Recurring Revenue Growth) is the rate at which a SaaS company's monthly recurring revenue increases or decreases over a specific time period. It measures the net change in predictable revenue by accounting for new revenue from new customers, expansion revenue from existing customers, and lost revenue from downgrades and churn.
MRR Growth is one of the most critical metrics for SaaS businesses because it directly reflects company health, business model effectiveness, and scalability. Unlike one-time revenue or total bookings, MRR Growth focuses exclusively on recurring revenue, providing a clear picture of sustainable growth trajectory. For investors, board members, and executive teams, MRR Growth serves as the primary indicator of whether a SaaS business is expanding, stagnating, or contracting.
The metric gained prominence with the rise of subscription-based software models in the early 2000s and has become the standard measure of SaaS performance. Strong MRR Growth indicates product-market fit, effective go-to-market strategies, and healthy customer retention. Conversely, declining MRR Growth signals fundamental problems with customer acquisition, retention, or expansion that require immediate attention.
Key Takeaways
Core Growth Indicator: MRR Growth is the primary metric SaaS companies use to measure business expansion and health over time
Four Components: Total MRR Growth consists of New MRR (new customers), Expansion MRR (upgrades/upsells), Contraction MRR (downgrades), and Churned MRR (cancellations)
Compound Impact: MRR Growth compounds monthly, making small improvements in retention and expansion highly valuable over time
Investor Priority: VCs and growth equity firms prioritize MRR Growth rate when evaluating SaaS companies, often more than absolute revenue numbers
Strategic Signal: The composition of MRR Growth (new vs. expansion vs. churn) reveals which GTM motions are working and where to focus resources
How It Works
MRR Growth operates by tracking the net change in monthly recurring revenue across four primary components:
New MRR comes from newly acquired customers who started subscriptions during the period. This reflects the effectiveness of sales and marketing efforts in landing new accounts.
Expansion MRR represents additional revenue from existing customers through upgrades, cross-sells, upsells, or additional seats. This component demonstrates product stickiness and account growth potential.
Contraction MRR captures revenue lost from existing customers who downgrade their plans, reduce seat counts, or move to lower-priced tiers. High contraction often signals product fit issues or competitive pressure.
Churned MRR accounts for revenue lost from customers who completely cancel their subscriptions. This is typically the most damaging component as it represents total customer loss rather than partial reduction.
The formula combines these components: MRR Growth = (New MRR + Expansion MRR) - (Contraction MRR + Churned MRR). The result can be expressed as an absolute dollar amount or as a growth rate percentage: (Current MRR - Prior Period MRR) / Prior Period MRR × 100.
SaaS companies typically calculate MRR Growth monthly and track it on a trailing 12-month basis to identify trends. The best-in-class SaaS businesses maintain monthly MRR Growth rates between 10-20%, with early-stage companies often growing faster and mature companies stabilizing at lower but consistent rates.
Key Features
Predictability: Focuses exclusively on recurring revenue, filtering out one-time fees and variable usage charges
Componentized Tracking: Breaks growth into distinct categories (new, expansion, contraction, churn) for actionable insights
Forward Indicator: Strong MRR Growth today predicts ARR performance and valuation multiples tomorrow
Standardized Metric: Universally understood across SaaS investors, enabling benchmark comparisons and competitive analysis
Real-Time Visibility: Can be monitored daily or weekly through integration with billing systems and CRM platforms
Use Cases
SaaS Performance Tracking
Revenue operations teams use MRR Growth as the primary dashboard metric for executive reporting. They build visualizations showing the waterfall effect of new, expansion, contraction, and churned MRR to identify which components are driving or dragging overall growth. This visibility enables data-driven decisions about where to allocate sales and marketing resources.
Investor Reporting and Fundraising
During funding rounds, SaaS companies present MRR Growth trends to demonstrate traction and scalability. Investors evaluate not just the growth rate but also the composition—companies with strong expansion MRR and low churn command higher valuations because they demonstrate efficient growth with strong unit economics. Consistent 15-20% monthly MRR Growth can be the difference between securing Series A funding and struggling to close a round.
Go-to-Market Strategy Optimization
GTM leaders analyze MRR Growth components to optimize strategy. If new MRR is strong but expansion MRR is weak, they'll invest in customer success programs and product-led growth initiatives. If contraction MRR spikes, they'll investigate pricing strategy or product feature gaps. This diagnostic approach turns MRR Growth from a lagging indicator into an actionable strategic tool.
Implementation Example
Here's how a SaaS company calculates and tracks MRR Growth:
MRR Growth Calculation
Component | Amount | Description |
|---|---|---|
Starting MRR (Jan 1) | $500,000 | Total MRR at beginning of month |
New MRR | +$75,000 | 15 new customers × $5,000 average |
Expansion MRR | +$25,000 | Existing customer upgrades/upsells |
Contraction MRR | -$10,000 | Downgrades from 3 customers |
Churned MRR | -$15,000 | 3 customers cancelled completely |
Ending MRR (Jan 31) | $575,000 | Net total after all movements |
Net New MRR | +$75,000 | Month-over-month growth |
MRR Growth Rate | 15% | ($75,000 / $500,000) × 100 |
MRR Growth Dashboard Metrics
Key MRR Health Ratios
Expansion Rate: Expansion MRR / Starting MRR = 5% (healthy above 3%)
Churn Rate: Churned MRR / Starting MRR = 3% (target below 5% for SMB, 1-2% for enterprise)
Net Revenue Retention: ((Starting MRR + Expansion - Contraction - Churn) / Starting MRR) × 100 = 110%
According to OpenView's SaaS benchmarks research, top-quartile SaaS companies maintain MRR Growth rates above 15% monthly while keeping gross logo churn below 2%.
Related Terms
ARR Growth: Annual recurring revenue growth, the yearly equivalent of MRR Growth
Net Revenue Retention: Measures revenue retention including expansion, closely tied to MRR Growth composition
Churn Rate: The percentage of MRR or customers lost, a key detractor from MRR Growth
Expansion Revenue: Revenue growth from existing customers through upsells and cross-sells
Customer Lifetime Value: Total revenue expected from a customer, directly impacted by MRR Growth patterns
CAC Payback Period: Time to recover customer acquisition cost, influenced by MRR Growth trajectory
SaaS Metrics: Broader category of performance indicators including MRR Growth
Revenue Operations: Team responsible for tracking and optimizing MRR Growth
Frequently Asked Questions
What is MRR Growth?
Quick Answer: MRR Growth is the rate at which a SaaS company's monthly recurring revenue increases, calculated by adding new and expansion revenue while subtracting contraction and churned revenue.
MRR Growth measures the net change in predictable monthly revenue for subscription businesses. It's calculated by taking the difference between current month MRR and prior month MRR, divided by prior month MRR. The metric provides a clear indicator of business health and trajectory, essential for strategic planning and investor communications.
What's a good MRR Growth rate for a SaaS company?
Quick Answer: Good MRR Growth rates vary by stage: early-stage companies target 15-30% monthly, while mature SaaS businesses aim for 5-15% monthly growth.
MRR Growth benchmarks depend on company stage and market position. Seed and Series A companies typically aim for 20-30% monthly growth to demonstrate product-market fit and scalability. Series B and C companies target 10-20% monthly growth as they scale go-to-market operations. Public SaaS companies often stabilize at 5-10% monthly (60-120% annually) as they reach market maturity. According to SaaS Capital's research, median growth rates decline as companies mature but efficient growth with strong retention becomes more valuable than pure growth velocity.
How is MRR Growth different from revenue growth?
Quick Answer: MRR Growth tracks only recurring subscription revenue, while total revenue growth includes one-time fees, professional services, and variable usage charges.
MRR Growth isolates predictable, recurring revenue streams that define the SaaS business model. Total revenue growth might include implementation fees, training services, hardware sales, or variable consumption charges that don't repeat monthly. Investors and boards focus on MRR Growth because recurring revenue is more valuable, predictable, and scalable than one-time revenue. A company might show strong total revenue growth while MRR Growth stagnates if they're relying heavily on non-recurring revenue sources.
What causes negative MRR Growth?
Negative MRR Growth occurs when combined contraction and churned MRR exceed new and expansion MRR. Common causes include inadequate product-market fit leading to high churn, ineffective customer success programs failing to prevent downgrades, aggressive competition stealing customers, pricing misalignment causing downgrades, or insufficient sales and marketing investment failing to generate enough new MRR to offset losses. Negative MRR Growth is a critical warning signal requiring immediate strategic intervention.
How do you improve MRR Growth?
To improve MRR Growth, focus on four levers: increase new MRR through better lead generation and conversion, boost expansion MRR through customer success programs and product-led growth initiatives, reduce contraction MRR by addressing pricing and packaging issues, and minimize churned MRR through improved onboarding and retention programs. Most high-performing SaaS companies find that reducing churn and expanding existing accounts provides faster ROI than purely focusing on new customer acquisition.
Conclusion
MRR Growth stands as the definitive metric for evaluating SaaS business performance and health. For revenue operations teams, it provides the foundational dashboard for tracking progress and diagnosing problems across the customer lifecycle. Marketing and sales teams use MRR Growth components to understand which acquisition channels and campaigns drive the most valuable customers. Customer success and product teams monitor expansion and churn components to optimize retention strategies and expansion opportunities.
The metric's value extends beyond internal operations to external stakeholders. Investors use MRR Growth rate and composition to assess company valuation, with consistent 15%+ monthly growth commanding premium multiples. Board members track MRR Growth trends to evaluate executive performance and strategic direction. The transparency and standardization of MRR Growth makes it the universal language of SaaS business performance.
As SaaS businesses mature, understanding the composition of MRR Growth becomes increasingly important. Companies that build sustainable growth through balanced new customer acquisition and strong net revenue retention create more valuable, resilient businesses than those relying purely on new logo acquisition. For any B2B SaaS company, mastering MRR Growth tracking and optimization is essential for long-term success and scalability.
Last Updated: January 18, 2026
