Monthly Recurring Revenue (MRR)
The total revenue billed each month under recurring agreements, such as managed services, security and cloud subscriptions.
Formula
Sum of monthly value of active recurring agreements
Why Track It
MRR is the base the whole business stands on: payroll, tooling commitments and valuation are all set against it. It is the first number an owner or buyer asks for.
How It Is Measured
Sum the monthly value of all active recurring agreements at month end: managed services, security bundles, backup, and cloud or license subscriptions billed on a recurring basis. Exclude one-time projects, hardware and hourly block time. Annual prepaid agreements count at one twelfth per month. Source: PSA agreements or the billing system, reconciled to accounting.
Constraints
Resold licenses inflate MRR at thin margins, so read it beside gross margin. Price increases and seat growth look the same in the total.
Measurement Note
There is no universal MRR level, since it scales with MSP size. Track new, expansion, contraction and churned MRR separately so a big new client does not hide losses elsewhere.
Referenced In
Related KPIs
- All-In Seat Price (AISP)The average monthly recurring revenue earned per supported user seat across all managed services clients.
- Days Sales Outstanding (DSO)The average number of days it takes to collect payment after invoicing.
- Managed Services Revenue GrowthThe year over year percentage change in managed services revenue, from new clients and from growth inside existing ones.
- Recurring Revenue as Share of TotalThe percentage of total revenue that comes from recurring agreements rather than projects, product resale and hourly work.
- Net Revenue Retention (NRR)The recurring revenue from existing clients a year later, including expansion and price increases, as a percentage of what they paid a year ago.
Glossary and Answers
More in Finance
The recurring revenue base, the margins it earns and how quickly cash comes in. These numbers tell an MSP owner whether the business is priced right and worth what a buyer would pay for it.
- Adjusted EBITDA MarginOwner
- All-In Seat Price (AISP)Owner
- Days Sales Outstanding (DSO)Finance Lead
- Effective Hourly RateFinance Lead
- Gross MarginFinance Lead
- Managed Services Gross MarginFinance Lead
- Recurring Revenue as Share of TotalOwner