Monthly Recurring Revenue (MRR) is one of the most important financial metrics in the subscription business. It helps an individual or a company to get a monthly financial prognosis from their subscription. Let's dive deeper into this concept. Monthly Recurring Revenue is the total predictable revenue generated by a business from all active monthly subscriptions.MRR includes the following::What are the three party payments in India

- Recurrent costs from discounts

- Recurring costs from coupons

- Recurrent value-added services

However, it does not include one-time costs.

With MRR, the current financial position of the business can be properly assessed. In addition, projections of future earnings can be created based on active subscriptions.

### MRR Calculation

Calculating MRR is a simple process that you will find is not complicated. All you need to do is multiply the following:

MRR = number of subscribers under monthly plan * ARPU (average revenue per user)

For example, let's say you have 5 subscribers paying INR 300 per month. the MRR calculation would be:

(5 * INR 300) = INR 1500

For annual plan subscriptions, the calculation will be done by dividing the annual plan price by 12. You will then need to multiply the result by the number of annual plan customers.

For example, let's say a customer subscribes to your product with an annual renewal agreement of INR 1200.Now, the MRR is calculated as follows:

INR 1200 / 12 = INR 100

### Type of monthly recurring income

- **New MRR**: This is the additional revenue generated from new customers. These new customers are acquired in a specific month.

For example, the new MRR for 5 new subscribers under INR 500/month plan is calculated as follows:

5 * INR 500 = INR 2500

- **Upgrade MRR**: This is the additional revenue generated from subscriptions upgraded from the current pricing plan to a higher pricing plan. Value-added services will be considered here.

For example, let's say an existing customer has a basic plan subscription of INR 50/month. This customer now upgrades to the standard plan at INR 200 per month and purchases a value-added service at INR 25 per month. In this case, the upgrade MRR is calculated as follows:

INR 200 - INR 50 + INR 25 = INR 175

- **Downgrade MRR**: This refers to the reduction in revenue generated from subscriptions transferred from an existing plan to a lower plan.

For example, if a person downgrades from a Premium subscription plan of INR 500 to a Basic subscription plan of INR 100, the downgrade MRR will be:

INR 500 - INR 100 = INR 400

- **Extended MRR**: This refers to the additional revenue earned from existing customers, which increases in a given month compared to the previous month. Additional revenue is generated through cross-selling, up-selling and value-added services.

The extended MRR growth rate is calculated as follows:

(Extended MRR for a given month / Total MRR at the beginning of the month) * 100

For example, suppose a business has an MRR of INR 800K at the beginning of the month. during the month, the business earns an extended MRR of INR 17K through cross-selling, up-selling, and value-added services.

- **Churn MRR**: This is the total amount lost due to monthly subscription cancellations.

For example, let's say you have 3 customers paying INR 1000 per month. if they all cancel their subscriptions in the same month, the churn MRR will be INR 3000.

- **Net MRR**: This shows the increase or decrease in revenue in a given month compared to the previous month. Net new MRR is calculated as follows:

MRR (New) + Extended MRR - Churn MRR

For example, in a month, 5 new customers subscribe to the organisation's services, each paying INR 100 per month.At the same time, due to upgrades, 10 existing customers are upgraded from a plan with INR 100 per month to a plan with INR 200 per month. However, 3 customers of the organisation cancel their subscription and pay INR 200 per month each. in this case, the net new MRR for the month is as follows:

INR 500 + INR 1000 - INR 600 = INR 900.

### Conclusion

MRR tells us how well a business is operating. In addition, it provides significant actionable insights about the growth of the business. It is one of the most important metrics for any subscription business. To make the most of MRR, act now with PayU. try PayU's recurring fee suite.

### Frequently Asked Questions

- **What are the benefits of MRR? ** Benefits of MRR include: helping to track business performance; suitable for forecasting revenues; and forecasting monthly recurring revenues for the business.

- ** What is the difference between MRR and revenue? ** Revenue is simply income generated from normal business operations. In contrast, MRR refers to the sum of all subscription revenue, expressed as a monthly value.

- **How does MRR work? ** MRR tells us the monthly incoming revenue of a subscription business. It is calculated by multiplying an organisation's number of customers by the average of its monthly subscriptions.

- **What does MRR tell us about customer behaviour? ** MRR tells us about customer subscription behaviour through correlations between customers and their accounts.

- **Why is MRR better than the regular monthly revenue calculation? ** Conventional monthly revenue calculations do not take into account two key factors: annual subscriptions and subscription plan changes. As a result, it can create a misleading impression of a business's financial position. MRR, on the other hand, takes these two factors into account.