How to Calculate MRR Correctly
MRR is simple until annual plans and one-off fees arrive. Getting the definition right is what makes it useful for forecasting.
Last updated 2026-08-17
The rule
MRR is revenue you can reasonably expect again next month. Normalise annual contracts by dividing by twelve rather than booking the whole amount in the month it was paid — otherwise your chart is noise.
What to exclude
- Setup and onboarding fees
- Consulting and professional services
- Hardware and pass-through costs
- Anything that will not recur
The components worth tracking separately
New, expansion, contraction and churned MRR each tell you something different. Net MRR movement is the number that actually describes the health of the business.