MRR (Monthly Recurring Revenue)

MRR is the headline KPI of subscription-based business models, but applies to consulting firms with retainer fees or managed services too. It is computed by summing active contracts normalized on a monthly basis.

Related metrics are: New MRR (from new clients), Expansion MRR (upsell on existing clients), Churn MRR (lost clients) and Net New MRR (algebraic sum). A healthy company has a sustained Net MRR growth rate and net retention above 100%. ARR (Annual Recurring Revenue) is simply MRR x 12. The PSA, integrated with the CRM, automates the calculation and the trend decomposition.

Applying MRR to a consulting business requires being honest about what is genuinely recurring. A retainer that renews annually after a real decision is not the same as a subscription, and counting a twelve-month engagement as recurring revenue produces a number that looks like a SaaS metric and behaves like a backlog. Separating true recurrence from repeated project work keeps the metric from misleading its own management team.

Expansion and churn are more informative than the headline figure, because they describe the direction of the business rather than its current size. Net retention above one hundred percent means existing clients are growing faster than departures shrink them, which for a services firm is usually evidence that delivery quality and account management are both working — a conclusion no single-month MRR reading can support.