MRR & ARR calculator
MRR isn't one number, it's five movements netted together. Two businesses can post identical net new MRR with completely different growth efficiency underneath it, and the breakdown is where that difference actually shows up.
Ending MRR
$91,000
ARR
$1,092,000
MRR growth
13.8%
Quick ratio
2.6×
Net new MRR this month is +$11,000, and net revenue retention on the existing base sits at 98%.
The MRR waterfall formula
This breakdown is called a "waterfall" because each component flows into the next, additively, it's the same underlying number as a single "this month's revenue minus last month's" calculation, just decomposed into where the change actually came from.
A worked example
A SaaS business starts the month at $80,000 MRR. New customers add $12,000. Existing customers upgrading add $5,000 in expansion. A previously churned customer returns, adding $1,000 in reactivation. Downgrades cost $2,500 in contraction. Cancellations cost $4,500 in churn.
Net new MRR: $12,000 + $5,000 + $1,000 − $2,500 − $4,500 = $11,000. Ending MRR: $80,000 + $11,000 = $91,000, a 13.75% month-over-month growth rate.
MRR to ARR: the annual recurring revenue formula
ARR is the same recurring revenue expressed annually. At $91,000 in ending MRR, ARR is $1,092,000. MRR is the number operators watch month to month, since it reacts quickly to what's happening in the business; ARR is the number that shows up in board decks, fundraising materials, and year-over-year comparisons, since a single month's noise matters less at that scale.
The quick ratio: growth efficiency, not just growth
In the worked example above: ($12,000 + $5,000 + $1,000) ÷ ($2,500 + $4,500) = $18,000 ÷ $7,000 = 2.57: a healthy ratio, meaning the business adds roughly $2.57 in new recurring revenue for every $1 it loses.
Two businesses can post the identical $11,000 net new MRR from the example above through very different paths. One might add $50,000 and lose $39,000 to get there, a 1.28 quick ratio, a leaky, effortful growth engine. Another might add $15,000 and lose $4,000, a 3.75 quick ratio, efficient growth with room to spare. Net new MRR alone can't tell these two businesses apart; the quick ratio can.
Common benchmark: above 4 is excellent, 2-4 is healthy, 1-2 is growing but leaky, below 1 means the business is shrinking regardless of what the new-customer number looks like in isolation.
Net new MRR is an output. Quick ratio is the number that explains how hard the business worked to get there.
Net revenue retention vs. gross revenue retention
Both measure how much of the existing customer base is retained, excluding new customers entirely, but they treat expansion revenue differently. Net revenue retention (NRR) includes expansion, and can exceed 100% if upgrades outpace churn and contraction on the existing base. Gross revenue retention (GRR) excludes expansion entirely and caps at 100%, measuring pure retention with no credit for upsells.
In the worked example: NRR = ($80,000 + $5,000 − $2,500 − $4,500) ÷ $80,000 = 97.5%. GRR = ($80,000 − $2,500 − $4,500) ÷ $80,000 = 91.25%. The 6.25-point gap between them is entirely the expansion revenue. NRR credits it, GRR doesn't. NRR above 110% is considered excellent (the business grows even with zero new customers); GRR above 85-90% is a common healthy floor.
The five MRR movements, explained
Recurring revenue from customers who signed up this period, the most visible growth driver, and often the only one a team watches by default.
Additional revenue from existing customers upgrading, adding seats, or buying add-ons. Revenue growth with no new-customer acquisition cost attached.
Revenue from a previously churned customer returning. Small for most businesses, but a real, separate movement from a brand-new signup.
Revenue lost from existing customers downgrading, a partial loss, distinct from a full cancellation, and often an early signal that a full churn will follow.
Revenue lost from customers who cancelled entirely, the denominator of every retention metric, and the movement most worth tracking separately from contraction.
MRR growth rate benchmarks by stage
General patterns. Actual healthy growth depends heavily on starting MRR, since percentage growth gets mechanically harder to sustain as the base grows.
Early-stage (under ~$50K MRR): 10-20% month-over-month is a common healthy range, achievable in part because the base is small enough that a handful of new customers moves the percentage meaningfully.
Growth stage ($50K-$500K MRR): 5-10% month-over-month, as the base grows large enough that the same dollar growth produces a smaller percentage.
Later stage ($500K+ MRR): 2-5% month-over-month is often considered solid, sometimes reported instead as year-over-year ARR growth once monthly percentages become too small to be a meaningful headline number on their own.
Rule of 40
This is the single most commonly cited SaaS efficiency benchmark, and it builds directly on the growth rate already covered above. Add year-over-year revenue growth to profit margin (commonly EBITDA margin), and a healthy business clears 40% combined. The two trade off freely: a company growing 40% a year can run at 0% margin and still clear the bar; a company with flat growth needs a 40% margin to compensate; a company growing 20% needs roughly 20% margin.
A business with $780,000 in ARR a year ago and $1,092,000 now (the same figures from the worked example above) has grown 40.0% year-over-year. Paired with a 5% EBITDA margin, Rule of 40 score: 40.0 + 5 = 45, a clean pass, achieved mostly through growth rather than profitability, a common and reasonable mix for a business still investing heavily in expansion. This framing assumes investor funding is available to cover the gap. For a founder without that cushion, a more relevant question replaces it entirely: see the bootstrapped-founder version of these metrics.
MRR and unit economics
Churned MRR is the same underlying data as the churn rate feeding into a lifetime value calculation. Divide churned MRR by starting MRR to get a revenue-based monthly churn rate, which plugs directly into the LTV formula. A business tracking MRR movements already has the raw inputs for its own churn and lifetime-value math, without needing to recompute churn separately.
Why churn hurts MRR more than an equivalent slowdown in new sales
A dollar of churned MRR and a dollar of new MRR that simply didn't happen look identical in a single month's net new MRR figure, but they're not equivalent going forward. Lost new sales are a one-time opportunity cost, the business can still sell to that same prospect next month. Churned MRR is gone permanently unless the customer reactivates, and it also compounds: a churned customer's revenue is absent from every future month's starting MRR, not just the month they left. This is the same underlying reason the quick ratio weights churn and contraction as a denominator rather than netting them against new MRR in a single blended figure, the two loss types deserve separate attention because they behave differently over time, even when a single month's dollar impact looks the same.
MRR and your runway
Rising MRR directly extends runway by reducing net burn. Every dollar of net new MRR is a dollar less that has to come from cash reserves each month. A business adding $11,000 in net new MRR while holding expenses flat extends its runway by exactly the amount that $11,000 offsets net burn, which is why a rising quick ratio (efficient MRR growth) shows up indirectly as a lengthening runway, even without a single cost cut.
MRR vs. cash collected
MRR measures committed recurring revenue, not cash in the bank, a distinction that matters most for annual contracts. A customer who signs a $12,000 annual deal contributes $1,000 to MRR each month for the life of the contract, but the actual cash often arrives as one lump payment upfront. A business with a lot of annual contracts can show healthy, steadily climbing MRR while its actual cash position moves in much larger, choppier steps. MRR is the revenue-recognition view, cash collected is what a runway calculation actually needs, and the two can diverge meaningfully in any given month even though they converge over the life of a contract.
Compound monthly growth rate (CMGR)
A single month's growth rate is noisy. One large deal or one lost customer can swing it well above or below the underlying trend. CMGR smooths that out by calculating the constant monthly growth rate that would take starting MRR to ending MRR over a longer window, the same logic as a compound annual growth rate applied monthly instead of yearly. A business growing from $50,000 to $91,000 MRR over six months has a CMGR of (91,000 ÷ 50,000)^(1/6) − 1 ≈ 10.5%, a more stable figure to report and compare against benchmarks than any single month's number, which might have been an unusually strong or weak outlier.
Presenting an ARR waterfall to a board or investors
The same five-movement breakdown, run at an annual cadence instead of monthly, is the standard format investors and board members expect when reviewing SaaS revenue. Starting ARR, plus new, expansion, and reactivation, minus contraction and churn, equals ending ARR. Presenting only the net change ("ARR grew from $960K to $1.09M") answers less than the full waterfall does, since the same net change can come from a business firing on all cylinders or one quietly leaking revenue through churn while new sales happen to cover the gap. Precisely the distinction the quick ratio above is built to surface, and exactly what an experienced investor will ask for if it isn't shown upfront.
A quick ratio health check
Run through these before trusting a quick ratio or growth-rate figure.
Not just new and churned. Expansion, reactivation, and contraction are each real, distinct movements that change the picture.
Setup fees, professional services, and overages are not recurring and inflate MRR if included.
An annual deal is divided by 12 for its monthly contribution, not counted in full in the month it was signed.
Comparing this month's movements against a starting MRR from a different point in time produces a misleading growth rate.
Common MRR mistakes
A large onboarding fee or a one-time services engagement inflates MRR for a single month, then creates an unexplained drop the following month when it's correctly excluded.
Ignoring expansion and contraction hides a real part of the growth story, a business could be losing significant revenue to contraction while its new-and-churned numbers look perfectly healthy.
A strong month-over-month growth percentage can mask a low quick ratio if new-customer acquisition is simply outpacing an underlying churn problem, not solving it.
A $10,000 MRR business growing 20% a month and a $500,000 MRR business growing 4% a month may represent very similar absolute dollar growth, the percentage alone doesn't reveal that.
Frequently asked questions
Monthly recurring revenue, the predictable subscription revenue a business earns each month, normalized to a monthly figure regardless of billing frequency. One-time fees, overages, and non-recurring charges don't count toward it.
Revenue growth rate plus profit margin should equal or exceed 40%, the most widely cited SaaS efficiency benchmark. The two trade off freely: a company growing 40% a year can run at 0% margin and still pass; flat growth needs a 40% margin to compensate on its own.
ARR = MRR × 12, the same recurring revenue expressed as an annual figure. MRR is the number operators track month to month; ARR is more common in board decks, fundraising materials, and year-over-year comparisons.
Healthy early-stage SaaS businesses often grow MRR 10-15% month-over-month; the broader SaaS median is closer to 5%. Growth rate alone doesn't tell the whole story, though. See the quick ratio section below for why.
(New MRR + Expansion MRR) ÷ (Contraction MRR + Churned MRR), a measure of growth efficiency, not just growth size. Above 4 is considered excellent, 2-4 is healthy, below 1 means the business is losing more revenue than it's adding.
Because two businesses can post identical net new MRR with very different underlying health. One might add $50,000 in new and expansion MRR while losing $40,000 to churn (a 1.25 quick ratio); another might add $15,000 while losing $5,000 (a 3.0 quick ratio), the same $10,000 net new MRR, radically different growth efficiency.
Net revenue retention (NRR) includes expansion revenue from existing customers and can exceed 100%. Gross revenue retention (GRR) excludes expansion and caps at 100%, measuring pure retention without any credit for upsells. NRR above 110% is considered excellent; GRR above 85-90% is a common healthy benchmark.
Yes, normalized to a monthly figure, an annual contract worth $12,000 contributes $1,000 to MRR. This is standard practice, though it means MRR from annual-heavy businesses moves in bigger, less frequent steps than MRR from month-to-month subscription businesses.
Compound monthly growth rate smooths a single volatile month into a stable trend by calculating the constant growth rate that explains the change over a longer window. A single month's growth rate can be skewed by one large deal or one lost customer; CMGR is a fairer number to report and benchmark against.
MRR measures committed recurring revenue, not cash collected. Annual contracts especially can create a gap, a customer's MRR contribution is spread evenly across 12 months, but the actual cash often arrives as one upfront payment, so MRR and cash can diverge meaningfully in any single month.
Not over time. A missed new sale is a one-time opportunity cost, the prospect is still there next month. Churned revenue is gone from every future month's starting MRR, not just the month it left, which is why churn and contraction get separate attention in the quick ratio rather than being netted against new sales in one number.
Calculate your own MRR waterfall above, free, or see how it connects to customer lifetime value and runway.