MRR, ARR, churn:
steering SaaS recurring revenue
The recurring revenue metrics, their formulas, and above all their direct link to your cash flow. The guide for software founders.
MRR - monthly recurring revenue
MRR (Monthly Recurring Revenue) is the basic building block: the sum of all your subscriptions, normalized per month. A $1,200 annual subscription counts as $100 of MRR; an $80 monthly one counts as $80. You exclude one-off revenue (services, setup fees).
It is often broken down into: New MRR (new customers), Expansion MRR (upsell/cross-sell), Contraction MRR (downgrades) and Churned MRR (cancellations).
ARR - the annualized version
ARR (Annual Recurring Revenue) annualizes MRR at constant scope.
It is the reference metric for talking about the size and growth of a SaaS, especially with investors.
Churn - the attrition that erodes everything
Churn measures what you lose. Two angles:
Net churn (or NRR, Net Revenue Retention) is the most telling: it subtracts expansion from churn. An NRR > 100% means your existing customers bring in more each year, even without new acquisition - the sign of a healthy SaaS.
A worked example
| Metric | Value |
|---|---|
| MRR start of month | $50,000 |
| + New MRR | +$6,000 |
| + Expansion | +$2,000 |
| − Churn | −$3,000 |
| MRR end of month | $55,000 |
| ARR | $660,000 |
| MRR churn | 6% (3,000 / 50,000) |
| NRR | 98% ((50,000 + 2,000 − 0 − 3,000) / 50,000)* |
*NRR excludes New MRR (new customers), only the change in the existing base.
The crucial link with cash flow
Here is what many founders forget: MRR is not cash. MRR measures recognized revenue, but your cash depends on actual collections:
- An annual subscription collects 12 months at once → big cash inflow, then nothing.
- A monthly subscription spreads inflows → steadier but slower cash.
- Payment terms and late payments shift everything further.
Two SaaS with the same MRR can have radically different cash positions. Hence the value of steering MRR/ARR/churn and cash-flow forecast together.
MRR, ARR, churn and cash flow, in one place
Dafodoo connects to your Odoo and computes everything automatically from your subscriptions - no spreadsheet.
Try it for freeFrequently asked questions
What is MRR?
Monthly recurring revenue: the sum of subscriptions normalized per month. A $1,200 annual subscription counts as $100 of MRR. It excludes one-off revenue.
How do you calculate ARR?
ARR = MRR × 12. It is annualized recurring revenue at constant scope.
How do you calculate the churn rate?
Customer churn = customers lost ÷ customers at start of period. MRR churn = MRR lost ÷ MRR at start of period. Net churn (NRR) subtracts expansion.
Why is MRR linked to cash flow?
MRR measures recognized revenue; cash depends on actual collections. An annual subscription collects 12 months up front, a monthly one spreads inflows. Steering both together avoids cash surprises.
How do you track MRR, ARR and churn automatically?
Dafodoo connects to your Odoo and computes MRR, ARR, churn and revenue per customer from your subscriptions, while projecting your cash-flow forecast.