MRR growth rate
DEFINITION
MRR growth rate is the percentage change in a subscription business's monthly recurring revenue from one period to the next, showing how fast the recurring revenue base is expanding or shrinking.
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MRR growth rate is the percentage change in a subscription business's monthly recurring revenue from one period to the next. It measures how fast the recurring revenue base is expanding or shrinking, expressed as a percentage of where it started. Because it is a rate rather than a raw dollar figure, MRR growth rate lets a business compare momentum across months regardless of size, and compare its own trajectory over time. The inputs are the recurring revenue at the start and end of the period, and the movements that drive the change: new business, expansion, contraction, and churn. A subscription platform such as Recurly can track MRR and its component movements so the rate can be reported each period.
Why MRR growth rate matters for subscription businesses
Recurring revenue drives a subscription business, and its growth rate is one of the clearest signals of health. A steady positive rate shows the business is adding more recurring revenue than it loses; a flat or negative rate is an early warning that acquisition, expansion, or retention needs attention. The rate is most useful when broken down. The same net growth can come from strong new sales masking heavy churn, or from steady retention with modest new business, and those two situations call for different responses. Tracking the components behind the rate, not just the headline number, is what makes it actionable.
How to calculate MRR growth rate
The basic form compares MRR at the end of a period against the start:
MRR growth rate = (Ending MRR - Beginning MRR) / Beginning MRR x 100
The same result can be written in terms of net new MRR, which is the sum of the period's movements:
Net new MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR
MRR growth rate = Net new MRR / Beginning MRR x 100
To compare growth across several months at a smoothed, compounding rate, use the compound monthly growth rate over n months:
CMGR = ((Ending MRR / Beginning MRR) ^ (1 / n)) - 1
To calculate the basic monthly rate:
Record the MRR at the beginning of the period.
Record the MRR at the end of the period.
Subtract beginning MRR from ending MRR to get the net change.
Divide the net change by beginning MRR.
Multiply by 100 to express it as a percentage.
Illustrative worked example
The figures below are hypothetical, used only to show the calculation.
Beginning MRR: 100,000 dollars
New MRR added in the month: 12,000 dollars
Expansion MRR from existing customers: 6,000 dollars
Contraction MRR from downgrades: 1,000 dollars
Churned MRR from cancellations: 2,000 dollars
Net new MRR = 12,000 + 6,000 - 1,000 - 2,000 = 15,000 dollars
Ending MRR = 100,000 + 15,000 = 115,000 dollars
MRR growth rate = 15,000 / 100,000 x 100 = 15 percent
The business grew its recurring revenue by 15 percent that month, and the component view shows that growth came from new and expansion revenue outpacing contraction and churn.
Benefits and examples
Tracking MRR growth rate gives a subscription business a read on momentum and a way to compare each month's performance against the last. Main benefits:
It normalizes growth to a percentage, so trends are comparable month to month regardless of scale.
It exposes the drivers of growth when broken into new, expansion, contraction, and churn.
It feeds forecasting and planning, since a stable rate can be projected forward with appropriate caution.
For example, a business watching its rate slip from one month to the next can drill into the components to see whether the cause is slower new sales or rising churn, and direct effort accordingly. Reported alongside net new MRR, the rate shows both how fast and how much.
Frequently asked questions
How do you calculate MRR growth rate? Subtract beginning MRR from ending MRR, divide by beginning MRR, and multiply by 100. Equivalently, divide net new MRR for the period by beginning MRR and multiply by 100.
What is a good MRR growth rate? It depends heavily on company stage, size, and market, so there is no single target.
What is the difference between MRR growth rate and net new MRR? Net new MRR is the dollar amount of recurring revenue added in a period after churn and contraction. MRR growth rate expresses that change as a percentage of the starting MRR, which makes it comparable across periods and businesses of different sizes.
Should MRR growth rate be measured monthly or annually? Monthly is the most common cadence for the metric, but the compound monthly growth rate can smooth several months into one figure, and the same logic applied to ARR gives an annual view.
