What is the difference between MRR and ARR?

MRR is recurring revenue per month. ARR is the annual equivalent, usually MRR multiplied by 12.

Do one-time fees count in MRR?

No. MRR includes only recurring subscription revenue. Setup fees, services and one-off sales are tracked separately.

Is ARR the same as annual revenue?

No. ARR is the current recurring run rate. Annual revenue is what you actually earned over a year, including one-off income.

MRR and ARR: Monthly and Annual Recurring Revenue

Monthly recurring revenue (MRR) is the predictable subscription revenue a business earns each month. Annual recurring revenue (ARR) is the same figure on a yearly basis, usually MRR × 12. Both count only recurring subscription revenue, not one-off fees.

By Javier Alonso, Founder & CEO. Updated 2026-10-25.

Formulas

MRR: Sum of all active subscriptions' monthly value
ARR: MRR × 12
Net new MRR: New MRR + Expansion MRR − Contraction MRR − Churned MRR

MRR: monthly recurring revenue

Add up the monthly value of every active subscription. Annual plans are divided by 12, so a $1,200 annual plan adds $100 to MRR. Discounts reduce MRR to what the customer actually pays.

ARR: annual recurring revenue

ARR is MRR multiplied by 12. Companies with annual contracts, especially in B2B, often prefer to report ARR. Note that ARR is a snapshot of the current run rate, not a forecast or last year's actual revenue.

What not to count

One-off setup or implementation fees
Consulting and services revenue
Usage charges that vary a lot month to month (track them separately)
Free trials and customers who have not paid yet
Signed contracts that have not started

Counting these inflates MRR and misleads investors and your own planning.

MRR movements

Break monthly change into its parts:

New MRR: from new customers.
Expansion MRR: existing customers upgrading or adding seats.
Contraction MRR: downgrades.
Churned MRR: cancellations.

Two companies can grow at the same rate for very different reasons. Growth driven by expansion with low churn is far healthier than growth that relies on replacing customers who leave.

Worked example

A SaaS startup starts the month at $20,000 MRR. It adds $3,000 from new customers and $1,000 from upgrades, loses $400 to downgrades and $1,600 to cancellations.

Net new MRR = $3,000 + $1,000 − $400 − $1,600 = $2,000. MRR ends at $22,000, a 10% monthly increase, and ARR is $264,000.

For your role

Investors: Ask for the MRR bridge (new, expansion, contraction, churn) rather than the headline number.
Accelerators & incubators: For teams with subscriptions, MRR reported the same way every month is one of the clearest progress measures a program can collect.

Primary sources

SaaS Metrics 2.0 — David Skok, For Entrepreneurs
16 Startup Metrics — Andreessen Horowitz

Common questions

What is the difference between MRR and ARR?: MRR is recurring revenue per month. ARR is the annual equivalent, usually MRR multiplied by 12.
Do one-time fees count in MRR?: No. MRR includes only recurring subscription revenue. Setup fees, services and one-off sales are tracked separately.
Is ARR the same as annual revenue?: No. ARR is the current recurring run rate. Annual revenue is what you actually earned over a year, including one-off income.