iRealtee OS Glossary

Monthly Recurring Revenue (MRR)

Calculating MRR follows a straightforward process:

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is a financial metric that measures the total predictable and recurring revenue a business generates from subscriptions each month. MRR normalizes revenue streams by converting all subscription plans into a monthly value, enabling accurate forecasting and performance tracking.

Key Components

  • New MRR: Revenue from newly acquired subscribers during the month
  • Expansion MRR: Additional revenue from existing customers who upgrade or add services
  • Churn MRR: Revenue lost from customers who cancel their subscriptions
  • Contraction MRR: Revenue lost from customers who downgrade their plans
  • Reactivation MRR: Revenue recovered from previously churned customers who return
  • Net New MRR: The sum of New MRR and Expansion MRR, minus Churn MRR and Contraction MRR

How it Works

Calculating MRR follows a straightforward process:

  1. Basic Formula: Multiply the total number of paying customers by the average revenue per user (ARPU) per month

    • MRR = (Number of Customers) × (Average Monthly Revenue per Customer)

  2. Plan-Based Calculation: Sum the revenue from each subscription tier

    • Example: If you have 100 customers on Plan A (PHP 500/month), 50 on Plan B (PHP 1,000/month), and 30 on Plan C (PHP 1,500/month):
    • MRR = (100 × PHP 500) + (50 × PHP 1,000) + (30 × PHP 1,500) = PHP 145,000

  3. Annualized Subscriptions: For yearly subscribers, divide the annual amount by 12 to normalize

Pros & Cons

Advantages:

  • Provides predictable revenue forecasting
  • Enables data-driven decision making on hiring, marketing, and product development
  • Identifies growth trends and potential churn issues early
  • Simplifies comparison across different billing cycles

Disadvantages:

  • Does not account for one-time fees or variable charges
  • May mask seasonal fluctuations in customer behavior
  • Requires consistent tracking methodology for accuracy
  • Does not capture the full picture of business health without complementary metrics like LTV and CAC

Real-World Application

In the Philippine real estate industry, MRR tracking is essential for software platforms operating on a subscription business model. For iRealtee's billing dashboard, MRR serves as the primary metric for forecasting cash flow and analyzing subscription revenue health.

Real estate brokerages using SaaS platforms can monitor MRR to:

  • Forecast monthly operational budgets
  • Identify which subscription packages drive the most revenue
  • Detect early warning signs of customer churn
  • Make informed decisions about scaling agent teams or expanding service offerings

MRR also directly informs cash flow statements and financial statements, allowing realty hub administrators to project income against operational expenses like marketing spend and commission management payouts.

References

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