MRR (monthly recurring revenue)

MRR (monthly recurring revenue) is the monthly value of all your recurring subscriptions, with every plan converted to a per-month amount. A $600 annual plan counts as $50 of MRR, and a $30 monthly plan counts as $30. Most subscription businesses steer by it, because it shows what you will collect next month if nothing changes.

How Stripe calculates MRR

Stripe's billing analytics define MRR as the sum of the monthly value of all active and past_due subscriptions. A few rules follow:

• Left out. Stripe excludes taxes, customers on free plans, and metered (usage-based) prices.
• Trials. A standard free trial doesn't count until it converts.
• Past due still counts. A subscription with a failed renewal stays in MRR while Stripe retries. It drops out once it is canceled or marked unpaid.
• Discounts. You choose whether recurring and one-time discounts reduce MRR. Permanent recurring discounts are always subtracted.
• When a subscriber counts. You can count a subscriber from the start of the subscription, or only once the first payment arrives.

Stripe's example has 100 subscribers at $100 a month plus 50 at $600 a year. That is (100 × $100) + (50 × $600 / 12) = $12,500 MRR. Stripe notes that changes to these definitions take 24 to 48 hours to show in the Dashboard.

The events behind every change are customer.subscription.created, customer.subscription.updated (plan, quantity, discount or status changes) and customer.subscription.deleted.

MRR vs cash in the bank

MRR is the base for forecasting, hiring and fundraising. It is not the money in your bank this month. A customer who pays $600 up front for a year adds $600 of cash in one month but only $50 to MRR, every month, for the year. Your Stripe balance and your MRR will rarely match, and that is expected. Multiply MRR by 12 and you get ARR.

Two ways MRR misleads

The first is reading MRR as a promise. Past due subscriptions stay in MRR during retries, so part of your MRR can be revenue you won't collect. Trials are left out, so a strong signup week may not move MRR until conversions land.

The second is watching only the total. A flat month can hide $2,000 of new business offset by $2,000 of lost customers. MRR movements split the change into new, expansion, reactivation, contraction and churn, which shows what happened and who should respond.

What to do with MRR

• Founder. Check MRR weekly, and read the movements as well as the total. A drop in new MRR points to sales or marketing. A rise in churn points to product or billing.
• Finance. Reconcile MRR against cash collected. A widening gap usually means past due renewals worth chasing.
• Support and success. Treat involuntary churn as MRR you can recover. A failed renewal on a large plan deserves an email the same day.
• Everyone. Agree on one definition, such as whether discounts count and when a subscriber counts, so the number means the same thing in every conversation.

MRR in ChargeBell

ChargeBell adds the MRR change to the subscription alerts that move it. The new subscription alert converts the plan to a monthly figure, dividing an annual plan across 12 months. It leaves the MRR figure off trial and incomplete signups, so a trial doesn't count as revenue before it converts. The alert doesn't show the subscription status, so check that in Stripe. The subscription canceled alert shows the plan, the negative MRR change and when the subscription ends. It doesn't include the cancellation reason, so open the subscription in Stripe from the alert to see cancellation_details.reason. Plan upgrades and downgrades, failed payments and recovered payments each have their own alert.

Send new subscribers to #wins and cancellations to #revenue or #founders, and the team sees MRR change as it happens. For the full list of events worth following, read what Stripe events a founder should monitor.