MRR, explained

An investor asks for your MRR. Somewhere, a founder opens a spreadsheet, adds up last month's invoices, quietly includes a one-time setup fee and an annual plan that happened to renew — and reports a number that will need correcting later, in exactly the meeting where corrections hurt.

MRR has a precise meaning, and the precision is the point.

What MRR is

Monthly recurring revenue is the subscription revenue you can count on every month, normalized to a month. Two words carry the definition:

Recurring — only revenue that repeats by contract. Subscriptions count. Setup fees, one-time purchases, and services don't, no matter how large.
Normalized — an annual plan worth 12,000 SAR contributes 1,000 SAR to MRR every month of its term, not 12,000 in the month it was paid. Cash and MRR are different truths: cash tells you what arrived; MRR tells you what your business weighs.

ARR is the same number multiplied by twelve — the convention for talking about larger, annually-contracted businesses.

The four movements

MRR isn't one number so much as a balance of four flows, and sophisticated readers of your metrics will ask about each:

New MRR — from brand-new customers.
Expansion MRR — existing customers upgrading, adding seats, growing usage commitments. The healthiest revenue there is: it costs nearly nothing to acquire.
Contraction MRR — downgrades. Customers who stayed, but smaller.
Churned MRR — customers who left, including the ones dunning failed to save.

One derived figure is worth knowing by name: if expansion outweighs contraction plus churn, your net revenue retention is above 100% — meaning you'd grow even with zero new customers. It's the single number that most changes how investors read a SaaS business.

Where usage revenue fits

Usage-based revenue complicates the picture honestly: overage and metered charges are real revenue but not contractually recurring, so they don't belong in classic MRR. The mature answer for hybrid businesses — a base fee plus metered usage — is to report both: contracted MRR for predictability, usage revenue for growth. Blending them into one number flatters the present and misleads everyone, including you.

What this looks like in Tirdad

In Tirdad, the number exists before anyone asks for it:

The revenue dashboard splits contract revenue from usage revenue — the exact distinction above, maintained continuously instead of reconstructed quarterly.
Multi-currency breakdowns keep SAR and any other currencies honest, per period and per customer.
Per-customer drill-down shows who expanded, who contracted, and who churned — the four movements with names attached.
Because it's computed from the same subscriptions and meters that generate the invoices, the number the investor sees is the number the books support.

The spreadsheet retires; the answer to "what's your MRR?" becomes a glance.

This is billing, explained · 05 — one billing concept a week, in plain language. Previously: dunning. Next up: grace periods.

Ready for metrics your books can defend? Start free at tirdad.ai.