MRR is critical in forecasting future revenue from your subscriber base. It indicates trends in subscription patterns before they can be seen in revenue data.
MRR is the total revenue from active subscriptions normalized to a standard one-month period according to each subscription’s duration. It is distinct from monthly subscription revenue, which is just the amount of total revenue earned during a month. Braavo uses a 30 day period
On the same day, one user purchases a $100 annual subscription, and another user purchases a $2.99 weekly subscription.
$100 annual subscription normalized to 1 month = ($100/365*30) = $8.22 MRR
$2.99 weekly subscription normalized to month = ($2.99/7*30) = $12.81 MRR
Revenue = $102.99
New MRR = $21.03
MRR consists of the following parts. All categories are based on paying subscribers (after 1st payment and beyond) and exclude trial subscribers.
New MRR - increases in MRR from subscribers after their first recurring payment.
Existing MRR - MRR of all subscriptions after their second recurring payment.
Expansion MRR - increases in MRR due to upgrades during the period.
Reactivation MRR - increases in MRR due to previously cancelled subscribers becoming active again.
Churn MRR* - decreases in MRR due to subscription cancellations.
Contraction MRR - decreases in MRR due to downgrades
Net MRR - is the final sum of each MRR category. If this figure increases, you are increasing the value of your subscriber base. Using the different category types you can tell if trends are based on changes in: volume of new users, retention/churn patterns, or subscription pricing/duration.
*Google Play does not differentiate cancellations for trial and paying users. As a result, we are unable to calculate Churned MRR for Google Play.
Detailed category example:
The following example describes these categories with two subscribers.
User 1 paid $100 for an annual subscription in January 2018 and cancelled before their first renewal.
User 2 paid $50 for annual subscription in April 2018 and renewed the following year.
Using the Report
There are a few interesting ways to view data in your MRR report.
By looking at positive MRR categories only, you can see all of your subscription revenue normalized to a month. This is helpful for showing business growth. Here revenue is growing = good!
A better way to view MRR trends is Net MRR, which compares the growth of new and existing revenue vs. lost revenue from cancellations and downgrades. In this view you can predict whether your subscription revenue will increase or decrease in the future. If churn MRR is growing at a consistent rate with positive MRR, you will see revenue increase but Net MRR remain unchanged. This allows you to see patterns in acquisition and renewal rates, and highlight where you need to focus to grow your business.
In this case Net MRR is growing slightly = even better!
Net New MRR
Taking this a step further, you can compare just New MRR vs. Churned MRR. This gives you a more focused look on whether you are acquiring new subscription revenue faster than you are losing it. In an ideal case, your app's New MRR is outpacing its Churned MRR. Easier said than done!