MRR

What it means

MRR is the subscription revenue a business can expect to bill every month, normalised to a monthly figure. Annual plans are divided by twelve, so a customer paying $240 a year contributes $20 of MRR rather than appearing as a lump in one month. The point of the measure is predictability: it answers what the business earns next month if nothing changes.

What does not belong in it

Anything a customer buys once. Setup fees, migration charges, one-off consulting, hardware and lifetime deals are all revenue, and none of them is recurring. Including them is the most common inflation of the figure and the first thing a buyer's diligence separates out. A lifetime deal is the worst offender, because it converts future recurring revenue into cash today and leaves the MRR line permanently lower.

Why it attracts a premium

Recurring revenue does not have to be re-sold each month, which makes it materially less likely to disappear after a handover. A buyer looking at $3,000 of MRR is pricing a base that renews by default; the same $3,000 of one-off sales has to be earned again by someone who does not yet know how. That difference is worth several points of multiple, and often more.

The figures that qualify it

MRR on its own is incomplete without churn. A business with $5,000 of MRR losing 8% of customers a month is shrinking, and a buyer will price the trend rather than the total. Present the MRR alongside monthly churn, net revenue retention and the split by plan tier, and expect a buyer who understands the metric to ask for all three.