Monthly Recurring Revenue Calculator

Revenue isn’t profit, and you can increase your revenue but still be losing money. That’s a common anxiety for SaaS founders, who celebrate closing new deals yet lose sight of their existing customer downgrading and cancelling in silence. Seeing just the total revenue number makes you blind to the lost income from your existing users.

MRR is a flow metric that reveals if you’re growing through customer satisfaction, or if you need to spend money replacing people who are leaving. The magic happens with numbers above, which break out expansion revenue (which means you have an existing user who likes your product so much he/she/it is willing to pay for more) vs. New customer revenue (the new customer represents both money and potential churn). By breaking this out, you will know how much of your business is acquisition and how much is retention, early stage businesses tend to focus too much on acquisition. While acquisition is expensive, retention is where the profit lies.

Real SaaS Metrics That Matter

There’s also confusion around contract normalization; this is when you have to break down big yearly contracts into their actual monthly contribution. It’s like getting $24,000 for a year-long deal. If that’s your first month, great! But otherwise you’re not going to get all those dollars at once so you divide it out in its respective months. Why? Because investors want predictability, stripping away the “signing bonus” illusion reveals the repeating truth: what are you bringing in each month? If contract structuring masks how much is coming in each month then you don’t know how to cover server costs next month, even though your check might’ve spiked last month.

The rest of the story is retention metrics. Net Revenue Retention is how well you retain customer spend with churn and expansions. Gross Revenue Retention strips out expansion completely, so it’s what you keep without selling more feature. Is your Net Revenue Retention above one hundred percent? You don’t need to sell anyone new to grow revenue, your existing base are growing by itself. Is it under ninety percent? You’re on a treadmill, you have to always hunt for new customers to tread water, let alone grow.

They’ve got a handy reference table on the page that compares various SaaS motions, and while benchmarks will differ across companies, the direction of the metrics remains the same.

The headcount equivalent of dollar churn is called logo churn (the number of accounts that left). Logo churn can look high if a startup loses twenty small accounts but keeps one big one. In this case, revenue does not drop making the situation appear healthy in practice. But losing one big enterprise client destroys your revenue, yet doesn’t budge the logo churn percentage much at all. Both measures is required: dollar churn for income; logo churn for market satisfaction. And when they differ, you’ve got a story to investigate.

How do you predict? Forecast! And what does that prediction say? Well, the tool says that given today’s momentum, it will project that same growth rate into future. Which is never necessarily the case for ever, but it’s a good starting point as to where you’ll be without any change. Too high, and you better learn how to manage expectations gently. Too low, and you know you should of got moving.

You cannot define what you cannot manage. Normalize the contracts, separate the flows, and track the retention rates. When you do, the real picture of your business will emerge, and the numbers won’t lie any longer.