Monthly Recurring Revenue

Not a triple vaccine for young children (which is measles, mumps, rubella) but MRR is your Monthly Recurring Revenue. This is a useful indicator for anyone who wants to develop a recurring income business model in their business to help cash flow.

If you sell memberships, maintenance fees, hosting fees, and subscriptions, this is a very important number for you as you want to increase it.

Definition of recurring revenue

Recurring revenue is the turnover from products or services you create and charge customers for every month or every year.

I love recurring revenue because it means you continually have money coming into the business from the same customers, which gives you more secure cash flow.

People also talk about monthly recurring revenue (MRR) and annual recurring revenue (ARR).

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue is how much recurring revenue you receive in a month.Many companies will measure their Monthly Recurring Revenue (MRR) as an important KPI and a measurement of their financial health.

Annual Recurring Revenue (ARR)

You can also measure Annual Recurring Revenue (ARR), which is the total amount of revenue you receive from clients who pay you regularly. This includes people who pay you monthly, quarterly or annually, so it’s all the recurring revenue you receive in a year.

The point of measuring MRR or ARR (or both) is to give you the confidence of what you expect to receive next month or in the next 12 months. Your MRR or ARR numbers give you the confidence and ability to make strategic-level decisions for your business.

Calculating MRR and ARR – worked examples

Recently, I helped a client set his MRR target as enough to pay all his bills so he could know that he’d have enough money coming in from this side of his business to cover payroll, office rent, his own software subscriptions, etc.

It worked wonders as an incentive to grow this side of the business, as what my client was working for was cash flow security, so he could know that his bills were going to be paid each month without the headache of having to chase clients for payment.

MRR is often used with DD – direct debits or regular payments on your clients’ debit or credit cards.

What’s your MRR? Can you increase it as a proportion of your overall revenue?

Other articles about MRR, monthly recurring revenue, and retainers

I’ve also written more about MRR and the recurring income business model.  Take a look…

I also absolutely love this book by John Warrilow, which gives some great ideas for increasing MRR in even the most traditional of businesses.  John’s book has been very inspirational to me, and I’ve used his ideas a lot with my clients.  The Automatic Customer by John Warrilow.

Photo of the Forth Bridge – David Mckelvey