How to Calculate MRR: The Formula, What Counts and Worked Examples

MRR (monthly recurring revenue) is the monthly value of the subscriptions you have right now. The formula is short, but every billing tool makes choices about what counts: discounts, failed payments, pauses, cancellations scheduled for later. This guide gives the formula, shows how Stripe, Chargebee and Recurly treat each case, and works the numbers through for a subscription ecommerce brand.

What is MRR?

Monthly recurring revenue is the predictable, recurring part of your income, expressed per month. Stripe defines it as the sum of the monthly-normalized value of all active and past-due subscriptions.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue) Chargebee calls it the predictable recurring revenue earned from subscriptions in a specific period.3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics)

MRR is a management metric, not an accounting figure. Recurly says it plainly: MRR isn't equivalent to GAAP revenue.5Recurly Docs, Monthly recurring revenue Four numbers get confused with it:

The MRR formula

MRR = sum of the monthly value of every active subscription

The monthly value is the recurring price, converted to a month, minus recurring discounts, without taxes. When every customer pays the same monthly price, the formula becomes a shortcut: number of paying customers × average monthly revenue per customer. With several plans, calculate each plan and add them up. Stripe's documentation gives this example:1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue)

The customers × average shortcut breaks as soon as people pay on different intervals or at different prices: you need the average per customer, and computing it already requires the per-subscription monthly values. Stripe works it the other way round: average revenue per user is total MRR divided by active subscribers.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue)

Normalizing billing intervals

Every interval has to be brought back to one month. Recurly normalizes all charges to a monthly value; Chargebee gives the example of a 1,200 USD annual payment, normalized as 100 USD per month.5Recurly Docs, Monthly recurring revenue3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics) The conversion is arithmetic:

The every-4-weeks row is the one that catches ecommerce brands. Four weeks is not a month: a year holds 13 four-week cycles, not 12. Count a 30 USD every-4-weeks plan as 30 USD of MRR and you understate it by about 7.7%.

What counts in MRR, and what doesn't

The three big billing platforms agree on the core and differ at the edges. Here is what their documentation says, item by item:

Discounts deserve a second look. Stripe calls subtracting them "a more conservative approach" because it reflects what customers actually pay.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue) A subscribe-and-save price that never expires is a permanent recurring discount: Stripe always subtracts it, and so should you. A 25% off first order is one-time: it changes one invoice, not the monthly run rate.

When a subscription enters and leaves MRR

The status of a subscription decides whether it counts. The sequence below follows Stripe's statuses; Chargebee's are close.

The rules behind each step:

• Trial to paid. At Stripe, a trialing subscription doesn't count; once it turns active, it counts even if the first invoice is unpaid.2Stripe Support, Understanding Monthly Recurring Revenue (MRR) You can change that: Stripe lets you consider a subscriber active only when the first payment is received.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue)
• Failed renewals. Stripe keeps past_due subscriptions in MRR; a subscription marked unpaid or canceled leaves it as churn.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue) Chargebee keeps a subscription in dunning Active, and in MRR, until the dunning period ends.3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics) Recurly shows MRR still being collected as an "In Dunning" series; you choose whether recurring charges from failed invoices count.5Recurly Docs, Monthly recurring revenue
• Pauses. Stripe's MRR guide lists a paused subscription among the events that count as churn.2Stripe Support, Understanding Monthly Recurring Revenue (MRR) Chargebee reports Pause MRR on its own line, inside gross MRR churn, while stating that paused subscriptions aren't counted in churn.3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics)6Chargebee Docs, What is Pause MRR and Cancellation/Churn MRR
• Cancellations. Chargebee counts a canceled subscription until its cancellation date; its month-end MRR is zero.4Chargebee Docs, What is included/excluded in the MRR calculation Stripe goes further: a subscription set to cancel at the end of the period stops counting at the time of the request, not when the period ends.2Stripe Support, Understanding Monthly Recurring Revenue (MRR) Chargebee, by contrast, keeps non-renewing subscriptions in MRR until they end.4Chargebee Docs, What is included/excluded in the MRR calculation

So the same customer who clicks "cancel" on the 5th, effective on the 30th, leaves MRR on the 5th in Stripe and on the 30th in Chargebee. Neither is wrong. If you compare a dashboard with a spreadsheet, check this rule first.

MRR is also measured at a point in time. Stripe's monthly report gives the MRR of each subscriber at the end of each month, and Recurly's monthly view shows data for the last day of the period.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue)5Recurly Docs, Monthly recurring revenue Pick the same snapshot day every month: the last day is the usual choice.

The MRR components: new, expansion, contraction, churn, reactivation

Total MRR tells you where you are. The components tell you why it moved. Billing tools split the change into five movements:

These definitions follow Stripe.2Stripe Support, Understanding Monthly Recurring Revenue (MRR)1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue) Chargebee groups things differently: it puts reactivation and free-to-paid inside expansion MRR, and adds pause MRR to downgrades and cancellations to form gross MRR churn.3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics) Stripe adds a sixth line, an FX adjustment, when subscriptions in other currencies change value against your reporting currency; Chargebee shows exchange-rate effects as their own category too.1Stripe Docs, Billing analytics: metric definitions (MRR, MRR growth, active subscribers, ARPU, churned revenue)3Chargebee Docs, Monthly Recurring Revenue (Billing 2.0, reports and analytics)

The formulas:

Net new MRR = new MRR + expansion MRR + reactivation MRR − contraction MRR − churned MRR

Ending MRR = starting MRR + net new MRR (± FX adjustment)

MRR growth rate = net new MRR ÷ starting MRR × 100

Here is one month for a subscription brand, worked through. Illustrative example: on March 1, MRR is 40,000 USD. During March, 120 new subscribers add 4,200 USD. Existing subscribers move to larger boxes for 600 USD. Fourteen former subscribers return for 350 USD. Others switch to smaller boxes or longer intervals for 450 USD. Cancellations and renewals that ended unpaid remove 2,100 USD.

The bridge is also a control. Add up the monthly value of every active subscription on March 31: if it doesn't come to 42,600 USD, some status changes weren't classified, and one of the five lines is wrong by that amount.

Two classification rules keep the components clean:

1. Record each change once, in one category. An upgrade is expansion, not churn of the old plan plus new MRR on the new one. A returning subscriber is reactivation, not new.
2. Use the change in run rate, not the invoice. A mid-cycle upgrade from 30 to 45 USD a month is 15 USD of expansion MRR, whatever the prorated invoice says. Stripe's MRR doesn't move with one-off refunds; Recurly, which builds MRR from invoiced charges, does count proration credits from upgrades and downgrades.2Stripe Support, Understanding Monthly Recurring Revenue (MRR)5Recurly Docs, Monthly recurring revenue

The movements feed your retention metrics. Churned and contraction MRR divided by starting MRR is gross revenue churn; the formulas and their pitfalls are in how to calculate churn rate. Comparing what the starting base kept, with and without expansion, is the subject of gross vs net retention.

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MRR vs ARR

Annual recurring revenue is the same run rate over a year: Stripe defines ARR as MRR × 12.2Stripe Support, Understanding Monthly Recurring Revenue (MRR) In the March example, 42,600 USD of MRR is 511,200 USD of ARR.

ARR is not a forecast of next year's revenue. It assumes every current subscription keeps paying today's price for twelve months, with no churn and no new customers. For a business on monthly plans that churns a few percent a month, the next twelve months will look different. Use ARR when you need an annual figure, and MRR to follow what changes month to month.

Don't build ARR by adding up annual plans at their full price and monthly plans × 12 separately with different rules. Calculate MRR once, with every interval normalized, and multiply.

MRR in subscription ecommerce: boxes, skips and shipping

Billing documentation is written with software subscriptions in mind. A physical subscription raises questions the docs don't answer: boxes whose content and price change, skipped deliveries, shipping on every order, add-ons bought once. Here is one subscriber, valued by the rules above:

The cases that need a written rule:

Repeat buyers who reorder without a subscription don't create MRR at all, however regular they are. Measure them with repeat-purchase and customer lifetime value metrics instead.

How to calculate MRR in a spreadsheet

Export your subscriptions (one row per subscription, not per customer or per invoice) and add one column that computes the monthly value.

Then MRR = =SUMPRODUCT(F2:F5000, G2:G5000). Row 2 gives 32 × 52 ÷ 4 ÷ 12 = 34.67 USD.

Take a snapshot on the same day each month, keep the old files, and compare two snapshots subscription by subscription to classify the movements: an ID present only in the new file is new or reactivated, an ID that dropped out is churned, an ID whose monthly value changed is expansion or contraction. If you decide that past_due subscriptions don't count, change column G and say so next to the number.

Common MRR calculation mistakes

Three more that don't show up as a pattern:

• Using processor payouts or invoice totals as MRR. Payouts reflect settlement timing, refunds and disputes; invoices mix recurring and one-time lines, tax and shipping. MRR comes from subscriptions, not from money movements.
• Counting a failed renewal as churn the day it fails. Most renewals are retried. The subscription stays in MRR while it's past due and leaves it only if recovery fails. Why renewals fail, by decline code, is in subscription payment failures; the recovery process is in what is dunning.
• Changing definitions without restating history. If you start subtracting one-time discounts in June, MRR before and after June isn't comparable. Restate past months, or mark the break on the chart.

Write your rules down in one place: snapshot day, interval conversion, discounts, past-due treatment, pauses, scheduled cancellations, shipping. Anyone recomputing the number should land on the same figure.

Where Tagada fits

Whatever tool computes it, MRR is the same calculation: active subscriptions only, every interval brought to a month, taxes, shipping and one-time charges left out, and each month's change explained by new, expansion, reactivation, contraction and churned MRR.