What is SaaS MRR?
SaaS MRR, or Monthly Recurring Revenue, is the steady, predictable income a SaaS business earns each month from subscription-based customers. It’s a key metric that highlights a company’s financial health, growth trends, and long-term stability.
Why is MRR so crucial? We’ll dive into the details later, but the main benefit is its reliability—it eliminates the uncertainty of one-time sales and ensures a steady revenue stream. For example, if 200 customers each pay $50 per month, the MRR is $10,000.
This consistent income gives SaaS businesses the ability to plan growth strategies, allocate resources effectively, and catch the attention of investors. It’s the foundation for building a sustainable, scalable business.
Why is SaaS MRR Important?
1. Financial Planning and Stability
MRR provides a steady revenue baseline, making financial forecasting and budgeting easier. It allows SaaS businesses to predict cash flow and plan long-term investments.
2. Performance Insights
Tracking MRR trends reveals whether sales and marketing strategies are working. A growing MRR indicates effective customer acquisition and retention efforts.
3. Investor Confidence
Investors prioritize recurring revenue metrics like MRR because they signal stability, scalability, and predictable income.
How is SaaS MRR Calculated?
Calculating MRR is straightforward: MRR = Number of Customers × Average Revenue Per User (ARPU)
Example:
If your SaaS platform has:
- 300 active subscribers,
- Each paying $80 per month, Your MRR = 300 × $80 = $24,000.
This calculation can be further broken down into specific categories of MRR:
Types of SaaS MRR
1. New MRR
Revenue generated from newly acquired customers in a given month. For example, 20 new customers subscribing to a $100/month plan add $2,000 in New MRR.
2. Expansion MRR
Additional revenue from existing customers through upgrades, add-ons, or cross-selling. For instance, if 10 customers upgrade from $50 to $100/month, that adds $500 in Expansion MRR.
3. Churned MRR
Revenue lost when customers cancel or downgrade their subscriptions. If 5 customers paying $50/month cancel, your Churned MRR is $250.
4. Net MRR
The overall monthly revenue after accounting for new, expansion, and churned MRR: Net MRR = New MRR + Expansion MRR - Churned MRR
Strategies to Increase SaaS MRR
1. Enhance Product Quality
The foundation of a growing MRR lies in offering a product that solves real customer problems. Focus on improving user experience, adding valuable features, and resolving bugs promptly. Happy customers are more likely to stay subscribed and recommend your service.
2. Optimize Pricing Models
- Tiered Pricing: Offer plans that cater to different customer needs, such as basic, professional, and enterprise tiers.
- Value-Based Pricing: Set pricing that reflects the value your product provides to customers, making them willing to pay more for better results.
3. Upsell and Cross-Sell
Encourage customers to upgrade to higher-tier plans or purchase additional features. Examples:
- Upsell: Move users from a $50/month plan to a $100/month premium plan with advanced analytics.
- Cross-Sell: Recommend add-ons like integrations or training modules.
4. Reduce Churn
Retaining customers is as important as acquiring new ones. Implement strategies to keep users engaged:
- Onboarding Programs: Ensure customers understand how to use your product effectively.
- Proactive Support: Address issues before they escalate into cancellations.
- Regular Check-Ins: Collect feedback and implement necessary improvements.
SEO as a Strategy to Increase SaaS MRR
Search Engine Optimization (SEO) is one of the most cost-effective ways for SaaS companies to grow their MRR.
Why? SEO helps you reach potential customers who are actively searching for solutions. For example, ranking for keywords like "best CRM for startups" brings qualified traffic straight to your site, leading to more sign-ups and revenue.
This isn’t just talk—we’ve seen it work time and again with our SaaS clients.
Take Cleanvoice.io, an AI-powered podcast editing tool. After partnering with our SaaS SEO agency, their MRR shot up by 300% in just six months. And Instatus, a status page SaaS provider, saw even bigger results—an 833% increase in MRR within a year using Embarque’s SEO strategies.
So how can you do this?
So, how can you make it happen?
1. Keyword Targeting
Focus on high-intent transactional keywords to attract people further down the funnel who are ready to convert.
Tools like Keyword Metrics make it easy to filter for these commercial queries, and platforms like Ahrefs or SEMrush are solid options too.
2. Content Marketing
Use your keyword research to create SEO blog posts, guides, and case studies that tackle your audience’s pain points. Take it a step further by promoting this content across multiple channels for added visibility.
3. Technical SEO
Boost your website’s speed, ensure it’s mobile-friendly, and make navigation seamless to enhance both user experience and search rankings.
4. Link Building
Earn backlinks from authoritative sources in your niche. Try guest blogging on SaaS blogs or using platforms like Featured.com. You can also create roundups or collaborate with industry sites.
Need ideas? Check out our detailed guide on SaaS link-building strategies that actually work.
5. Conversion Rate Optimization (CRO)
Fine-tune your landing pages for high-intent keywords to turn visitors into subscribers or customers.
Measuring SaaS MRR Growth
1. Monthly Growth Rate
Monitor how much your MRR grows month over month. A consistent growth rate indicates successful strategies.
2. Churn Rate
Track the percentage of revenue lost to cancellations. Reducing churn has a direct impact on net MRR.
3. Customer Lifetime Value (CLV)
Calculate how much revenue each customer generates over their lifetime. A higher CLV means a more sustainable business.
4. Customer Acquisition Cost (CAC)
Keep an eye on how much it costs to acquire a customer. The lower the CAC compared to the MRR they generate, the better.
FAQs About SaaS MRR
1. What is SaaS MRR?
SaaS MRR is the total predictable monthly revenue generated from active subscriptions. It excludes one-time payments and focuses on recurring income.
2. How do you calculate churned MRR?
Churned MRR is the revenue lost from cancellations or downgrades. Example: If five customers paying $100/month cancel, your churned MRR is $500.
3. Why is MRR important for SaaS businesses?
MRR helps forecast revenue, track growth trends, and attract investors by showcasing predictable income streams.
4. How can SEO impact SaaS MRR?
SEO attracts high-intent traffic, driving more sign-ups and lowering customer acquisition costs. It’s a sustainable way to grow MRR.
5. What’s the difference between MRR and ARR?
MRR is calculated monthly, while ARR (Annual Recurring Revenue) is the yearly equivalent: ARR = MRR × 12.
6. What’s a good MRR growth rate?
Early-stage SaaS companies should aim for a 10–20% monthly growth rate, while mature companies may target 5–10%.
