Your monthly or annual recurring revenue (MRR and ARR for short) is one of the primary reason we're all in SaaS. Recurring revenue means our growth can compound and through this momentum we can ensure we're always improving and building something beautiful. Here we walk through exactly how to calculate Lifetime Value (MRR/ARR), including what to and not to include in the calculation, as well as how to optimize this crucial SaaS metric.

1. MRR/ARR:
Calculating and Optimizing
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)
Price Intelligently’s SaaS Metric Mondays

2. Let’s talk about MRR & ARR
The truest look into the health of your SaaS company
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

3. MRR =
Monthly Recurring Revenue
ARR =
Annual Recurring Revenue
(MRR x12)
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

4. MRR/ARR =
The normalized monthly/annual revenue from all of the
recurring items in subscription service. This metric is the
truest form of visualizing the money coming into your
business
Want To See What Your MRR/ARR Is Right Now?
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Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

5. Here’s How You Breakdown MRR Visually
(via ProfitWell Dashboard)
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

6. All that stuff is great but…why
should you care?
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

7. “Not tracking MRR/ARR is like
winning the lottery and then setting
the ticket on fire - #SaaSfoul”
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

8. More specifically…
Understanding your MRR/ARR can help:
Make consistent and predictable financial
forecasts that provide a realistic view of
where your SaaS company stands
FinanceProduct
Continue to get better and optimize on areas
experiencing high churn for maximum
improvement
See the breakdown of your MRR/ARR Churn with ProfitWell >>
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

9. Lets dive deeper and
calculate MRR/ARR like a
#SaaS superstar
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

10. What’s included in the
MRR/ARR calculation?
With MRR/ARR it is simple:
(Recurring + Upgrades) – (Downgrades + MRR Churn)
MRR/ARR Criteria Breakdown
Include Exclude
All recurring items Set up fees
Account upgrades Credit adjustments
Account downgrades Non-recurring add-ons
MRR Churn One-time charges
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

11. The calculation breakdown
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)
EQUATION
True MRR can be found by the following equation breakdown.
ARR uses the same equation multiplied by 12.
MRR at the beginning of the month
MRR gained from new customers for the month
MRR change gained from upgrading customers for the month
MRR change lost from downgrading customers for the month
MRR Churn from the month
(ARR = MRR X 12)

12. Once you master calculating
MRR/ARR, Optimize It!
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

13. Create more recurring revenue
for your SaaS business by:
1. Increasing your net customer acquisition
2. Increasing expansionary revenue through
upgrades and value metric
3. Increasing your retention to boost your LTV
4. Reducing your CAC and other costs $
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Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

14. New customers in the door means more money for your
business. Optimize your LTV/CAC ratio to a point where your
customer acquisition cost is low and acquisition strategy
efficient
Key Optimization
Increase your net new customer acquisition
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

15. There’s a lot of money to be grabbed off the table from
current customers. Give them incentive to upgrade within
your product by aligning the product with your value metric.
Key Optimization
Increase your expansionary revenue through
upgrades and value metrics
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

16. Align your product with a value metric and customer personas.
This will naturally generate more MRR/ARR by expanding the width of
retained customers and lengthening customer life span or Lifetime
Value.
Key Optimization
Increase your retention to boost your LTV
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

17. If all else fails, trim the fat of your business to cut down on
costs.
This will push more money toward your revenue pile and lower
the strain of money your business is throwing at expenses
Key Optimization
Reduce your costs
COST
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

18. Boom.
Now you can maximize the health of
your SaaS business with your new
mastery of MRR/ARR.
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)

19. Want real time SaaS Metrics?
Know and understand your SaaS Metrics
with ProfitWell for free – the most accurate
metrics on the market
Click here to get your free ProfitWell account >>
Monthly Recurring Revenue (MRR) – Annual Recurring Revenue (ARR)