How to Calculate MRR: Simple SaaS Formula Explained

To calculate MRR, convert every active subscription to a monthly amount and add them together. The basic formula is MRR = customers × average monthly subscription price.

Step 1: Normalize plan prices to monthly values

If a customer pays $1,200 per year, their monthly contribution is $100. Do this for every annual, quarterly, or custom billing cycle before summing totals.

Step 2: Include discounts and add-ons

Subtract recurring discounts from the monthly plan value. Add recurring add-ons such as extra seats, usage blocks, or premium support if they bill every month.

Step 3: Calculate net MRR movement

Track four buckets each month: new MRR, expansion MRR, contraction MRR, and churned MRR. Net new MRR = new + expansion − contraction − churn.

This helps you understand whether growth is healthy or whether you are refilling a leaky bucket with new sales.

Worked example

Suppose you have 120 customers on a $79 monthly plan and 30 customers on a $990 annual plan ($82.50 per month). Base MRR = (120 × 79) + (30 × 82.50) = $9,480 + $2,475 = $11,955.

If 5 customers upgrade for an extra $20 per month and 3 customers cancel, expansion adds $100 and churn removes $237 (3 × $79). Net change that month = −$137 before new sales.