What is MRR and how is it calculated?

MRR (Monthly Recurring Revenue) is the normalised monthly value of all active subscriptions. Ending MRR = Starting MRR + New MRR + Expansion MRR + Reactivation MRR - Contraction MRR - Churned MRR. Only recurring charges count — one-off fees, setup charges and professional services are excluded.

What is the difference between gross and net MRR churn?

Gross MRR churn rate = Churned MRR / Starting MRR. It measures only cancellations. Net MRR churn rate = (Churned + Contraction - Expansion - Reactivation) / Starting MRR. When expansion revenue from existing customers exceeds losses, net churn turns negative — the holy grail of SaaS growth, known as negative churn or net revenue retention above 100%.

What is ARR and how does it relate to MRR?

ARR (Annual Recurring Revenue) = MRR multiplied by 12. It is the annualised view of subscription revenue and is typically used for fundraising, investor reporting and benchmarking against other businesses. It assumes the current month's MRR holds for twelve months, so it is a snapshot, not a guarantee.

How is LTV (customer lifetime value) calculated?

LTV = ARPU multiplied by gross-margin fraction, divided by monthly churn rate. For example, ARPU of $100, gross margin of 70% and monthly churn of 2% gives LTV = (100 times 0.70) / 0.02 = $3,500. This is the expected gross-margin contribution of a single customer over their lifetime. Divide LTV by CAC to benchmark acquisition efficiency — a ratio above 3x is the common SaaS target.

What is a healthy monthly churn rate for a SaaS business?

World-class SaaS companies target monthly churn below 0.5–2%. Consumer subscription products often see 3–8%. Above 5% monthly churn (more than 45% annual) is a red flag — half your revenue base rotates every year, making growth very hard to sustain. Focus on reducing churn before scaling acquisition spend.

How does the MRR projection work?

The projection takes this month's absolute new MRR additions (new + expansion + reactivation) and applies the current gross churn and contraction rates to a rolling MRR balance. Customer counts use the same logic with absolute new customer additions and the current customer churn rate. Rates are held constant, so treat projections as a directional model, not a forecast — real growth compounds when you improve the rates.

MRR Calculator — Gera Tools

MRR (Monthly Recurring Revenue) is the single most important metric for any subscription or SaaS business. It tells you, in one number, the normalised monthly value of all active paying customers — stripping out one-off fees, project revenue and anything non-recurring. Track it correctly and you have a real-time pulse on business health. Miss one of the five components and your growth story becomes noise.

This calculator lets you decompose MRR into its five standard movements, compute derived metrics including ARR, ARPU, LTV and churn, and project forward to see where you will be in 3, 6, 12, 24 or 60 months if current trends hold.

The five MRR movements

Every change to MRR in a given month falls into exactly one bucket:

New MRR — revenue from customers who were not paying at the start of the period.
Expansion MRR — extra revenue from existing customers (upsells, add-ons, seat increases).
Reactivation MRR — revenue from previously churned customers who came back.
Contraction MRR — revenue lost to plan downgrades or partial cancellations (customer stays, pays less).
Churned MRR — revenue lost to full cancellations.

Ending MRR = Starting MRR + New + Expansion + Reactivation - Contraction - Churned

Net New MRR is the single-line summary: the sum of all gains minus all losses.

ARR, ARPU and LTV

ARR = Ending MRR × 12. A snapshot annualisation, useful for investor and board reporting.
ARPU (Average Revenue Per User) = Starting MRR / Total customers. A rising ARPU alongside rising MRR signals healthy pricing power; falling ARPU suggests you are acquiring smaller accounts.
LTV (Customer Lifetime Value) = ARPU × gross-margin fraction / monthly churn rate. For a business with $100 ARPU, 70% gross margin and 2% monthly churn: LTV = (100 × 0.70) / 0.02 = $3,500. The LTV:CAC ratio (target 3× or higher) tells you whether acquiring customers is profitable at scale.

Worked example

A SaaS company starts June with $50,000 MRR and 500 customers.

Movement	Amount
New MRR	+$8,000
Expansion MRR	+$2,000
Reactivation MRR	+$500
Contraction MRR	-$1,000
Churned MRR	-$2,500
Net New MRR	+$7,000
Ending MRR	$57,000

MoM growth = $7,000 / $50,000 = 14% — well above the ~15% annual growth needed to double in five years.

With 25 churned customers: monthly churn = 25 / 500 = 5%, annual churn = 46%. At $100 ARPU and 70% gross margin, LTV = $1,400. That’s the signal to fix retention before pouring more budget into acquisition.

Formula reference

Ending MRR = Starting MRR + New + Expansion + Reactivation - Contraction - Churned
ARR = Ending MRR × 12
ARPU = MRR / Customers
Gross MRR churn = Churned MRR / Starting MRR
Net MRR churn = (Churned + Contraction - Expansion - Reactivation) / Starting MRR
Monthly customer churn = Churned customers / Starting customers
Annual churn = 1 - (1 - monthly churn)^12
Avg lifetime = 1 / monthly churn (months)
LTV = ARPU × (gross margin %) / monthly churn

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