# Monthly recurring revenue (MRR): what counts and what doesn’t

Source: https://analyzine.com/explained/monthly-recurring-revenue/  
Author: Sadiq Ahmed  
Updated: 2026-11-02

Quick answer

Monthly recurring revenue (MRR) is the subscription income a business can expect every month from its active customers, with yearly and quarterly plans converted into a monthly amount. It leaves out one-off sales, setup fees and tax, so it shows the steady, repeating part of your revenue rather than what happened to land in the bank.

## What monthly recurring revenue means

Monthly recurring revenue is a snapshot. Pick a date, look at every subscription that is active on that date, work out what each one is worth per month, and add them up. That total is your MRR.

It exists because subscription money is lumpy. A member who pays £96 for a year hands you all of it in one go, then nothing for eleven months. If you judged the business by monthly takings, that member would make one month look brilliant and the rest look flat. MRR smooths that out so you can see whether the underlying business is growing, standing still or shrinking.

It's the go-to number for memberships, online course subscriptions, software licences, subscription boxes and retainers. If most of your income comes from one-off orders, you'll get more from [average order value](https://analyzine.com/explained/average-order-value/) and repeat purchase rates instead.

## How to calculate MRR

The calculation is simple once you've decided what counts.

MRR = the sum of the monthly value of every active subscription

If everyone pays the same monthly price, that's just customers × price. Most sites have a mix, so you work plan by plan and add the results.

### Normalising annual and quarterly plans

Convert every plan to its monthly equivalent before adding it in:

- **Annual plan:** divide the yearly price by 12. A £96 yearly membership adds £8 to MRR.
- **Quarterly plan:** divide by 3. A £27 quarterly plan adds £9.
- **Weekly plan:** multiply by 52, then divide by 12. A £3 weekly box adds £13.

Use the price the customer actually pays. If someone has a 20% lifetime discount, count the discounted amount, not the list price.

### What to leave out

MRR only includes money that repeats. Leave out:

- One-off purchases, setup fees, add-ons sold once and shipping charges
- VAT and other sales taxes, since that money isn't yours
- Free trials, until the first paid charge goes through
- Subscriptions that have been cancelled, even if they're still active until the end of the paid period (some people keep these in until the access ends; pick one rule and stick to it)
- Payments that have failed and not been recovered after your retry period

## A worked example: a baking membership on WordPress

Say you run a WordPress membership site for home bakers. You sell three plans: Standard at £10 a month, Pro at £20 a month (which adds live classes) and Standard Annual at £96 a year.

On 1 March you have:

| Plan | Members | Monthly value each | MRR |
| --- | --- | --- | --- |
| Standard monthly | 150 | £10 | £1,500 |
| Pro monthly | 30 | £20 | £600 |
| Standard annual | 60 | £8 (£96 ÷ 12) | £480 |
| **Total** | **240** |  | **£2,580** |

Notice the annual members. Their renewals might bring in thousands in a single month, but they only add £480 to MRR. That's the point.

## The four MRR movements: new, expansion, contraction and churned

A single MRR total tells you where you are. The movements underneath it tell you why. Most subscription businesses split monthly change into four parts:

- **New MRR:** recurring revenue from customers who started paying this month.
- **Expansion MRR:** extra recurring revenue from existing customers who upgraded or added seats.
- **Contraction MRR:** recurring revenue lost when existing customers downgraded but stayed.
- **Churned MRR:** recurring revenue lost from customers who cancelled outright. You'll also see this called lost MRR or MRR churn.

Net new MRR = new MRR + expansion MRR − contraction MRR − churned MRR

Back to the baking club. During March:

- 20 people join Standard monthly and 5 join Standard annual: £200 + £40 = **£240 new MRR**
- 6 Standard members upgrade to Pro, each adding £10: **£60 expansion MRR**
- 2 Pro members drop back to Standard, each losing £10: **£20 contraction MRR**
- 12 Standard monthly members and 1 Pro member cancel: £120 + £20 = **£140 churned MRR**

Net new MRR is £240 + £60 − £20 − £140 = £140. So MRR on 1 April is £2,580 + £140 = £2,720.

That looks healthy. But look at the parts: you're losing £140 a month to cancellations and replacing it mostly with new sign-ups. If your marketing slowed down for a month, growth would stall. The breakdown shows you whether to spend your next week on finding members or keeping them. Some people also track **reactivation MRR** separately for former members who come back; it's optional, but useful if you run win-back offers.

## MRR vs ARR, and MRR vs the money in your bank

**Annual recurring revenue (ARR)** is the same idea scaled to a year. For most small businesses ARR is simply MRR × 12, so the baking club's ARR on 1 April would be £32,640. ARR tends to be used by businesses that mainly sell yearly contracts; MRR suits sites where most people pay monthly and change plans often.

Neither is the same as cash received or revenue in your accounts. Your accountant will recognise annual payments over the months they cover, and your bank balance will jump whenever annual renewals cluster. MRR is a management number for spotting trends. Don't use it in place of proper bookkeeping.

## Mistakes that make MRR look better (or worse) than it is

- **Counting annual payments in full.** The most common error, and it can make one month look several times bigger than reality.
- **Including one-off sales.** A busy month of course bundles or event tickets isn't recurring.
- **Counting trials as customers.** Trials are a pipeline, not revenue.
- **Keeping failed payments in.** Card failures are a real source of lost members. If a payment hasn't recovered, it isn't MRR.
- **Mixing currencies without converting.** If you charge in pounds and euros, convert at a fixed rate each month so exchange rate swings don't look like growth or decline.
- **Changing your rules halfway through the year.** Consistency matters more than which rule you pick.

## Using MRR to run a small subscription site

Calculate MRR on the same day every month and keep the four movements in a simple spreadsheet. After three or four months you'll see patterns: which month churn spikes, whether upgrades follow a particular email, how much new MRR a launch really added.

Then pair it with two neighbouring numbers. Your [churn rate](https://analyzine.com/explained/churn-rate/) shows the share of members or revenue you lose each month, and [customer lifetime value](https://analyzine.com/explained/customer-lifetime-value/) turns MRR per customer and churn into an estimate of what a new member is worth over time. That tells you how much you can sensibly spend to find one.

Finally, look at where new MRR comes from. If you know which channels and campaigns brought in the first order of each new subscription, you can put more effort behind the ones that work. Analyzine connects each WooCommerce or SureCart order with the channel and campaign that produced it, inside wp-admin and without sending visitor data to anyone else, which is a practical way to see which marketing actually adds recurring revenue rather than just traffic. Improving the [conversion rate](https://analyzine.com/explained/conversion-rate/) on your sign-up page is usually the cheapest way to grow new MRR once you know where your best visitors come from.

## Frequently asked questions

### What does monthly recurring revenue mean?

It means the subscription income you can expect to receive every month from your current customers, if nothing changes. It's calculated from active subscriptions, with longer billing periods converted into a monthly figure. One-off sales and fees aren't included.

### How do you calculate MRR with annual plans?

Divide the annual price by 12 and add that monthly amount for each annual customer. A member on a £120 yearly plan adds £10 to MRR every month of their subscription, not £120 in the month they paid. Quarterly plans work the same way, divided by 3.

### Is MRR the same as revenue?

No. Revenue in your accounts includes one-off sales, and cash in your bank reflects when people actually paid. MRR is a planning number that shows the repeating part of your income, smoothed out across months.

### What counts as recurring revenue?

Any charge that repeats automatically on a schedule: monthly or yearly memberships, course subscriptions, software licences, subscription boxes and retainers. Setup fees, one-off products, shipping and tax don't count. Free trials only count once the first paid charge succeeds.

### Why is recurring revenue important for a small business?

It makes income more predictable, which helps with planning, hiring and deciding what you can spend on marketing. It also shows problems early: a rise in churned MRR is visible within a month, long before it shows up in your annual accounts.