Deeper insights into calculating and optimizing MRR/ARR for SaaS
What to include when calculating MRR/ARR:
MRR/ARR is the sum of all subscription revenues that came into your business within a given period. Here are the items that you should include in your MRR/ARR calculations:
All recurring elements: This will include any elements of your subscription model that are recurring. For example, any monthly fees or other recurring charges such as per user/seat, per visit, etc.
Account upgrades: Capture the upgrade dollars from current customers who have expanded their use of your product, especially those who have moved up to a higher level plan or who have expanded their use of your value metric.
Account downgrades: This includes the total dollar amount of customers that have downgraded their service. This is important because downgrades represent money lost from current customers that have not churned.
Lost MRR from churned customers: This component is tallying the MRR/ARR that you lost from customers who actually churned, not those who've cancelled.
Churn strongly correlates with Company Age - The Waterfall Chart | The chart should plot: the growth in your MRR from last month, the growth in your MRR for the current month, and your month over month goal for MRR growth for the current month.
Here are the items you should include in your calculations:
MRR/ARR is the sum of all subscription revenues that came into your business within a given period. Here are the items that you should include in your MRR/ARR calculations. For a larger list of all the items companies are incorrectly excluding or including in MRR, check out this blog post: You're probably calculating MRR incorrectly. Here's Why.
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