What is Net MRR Growth Rate?
Importance of Net MRR Growth Rate
Net MRR Growth Rate measures your company's monthly revenue momentum by tracking all revenue movements. It shows RevOps leaders whether growth initiatives are working by combining new customer revenue with expansion revenue, minus any losses from churn and downgrades. This metric provides the clearest picture of sustainable business growth.
Unlike Quick Ratio and NRR, which can flatten minor variances, the net MRR growth rate helps you spot recent trend changes. This provides the clearest picture of sustainable business growth.
For example, notice that the Net MRR trend allows you to spot the shrinking new MRR or an uptick in cancellations or paused MRR.
When to Use Net MRR Growth Rate
Use the Net MRR Growth Rate for monthly and quarterly business reviews. It provides an immediate signal of your company's momentum. This metric is more sensitive to recent changes than metrics like Net Revenue Retention (NRR).
RevOps leaders use this rate to diagnose the health of revenue streams. A low growth rate can highlight issues with new customer acquisition or high churn. A high rate validates successful pricing changes or expansion campaigns.
This metric is critical for early-stage companies seeking investment. It demonstrates a clear trajectory and product-market fit. It also helps finance teams create more accurate short-term revenue forecasts.
How to Calculate Net MRR Growth Rate
Net MRR = (New MRR+Reactivation MRR+Upgrade MRR) - (Cancellation MRR +Downgrade MRR)
Net MRR Growth Rate = ((Net MRR of Current Month - Net MRR of Last Month) / Net MRR of Last Month)*100
Where:
New MRR is the additional monthly recurring revenue earned from new subscriptions acquired during a month.
Reactivation MRR is the monthly revenue earned from previously churned or canceled subscriptions that are reactivated during the month.
Upgrade MRR is the monthly recurring revenue generated when subscriptions are moved from existing plans to higher plans.
Contraction MRR is the total reduction in MRR due to downgrades and subscription cancellations, or churn, compared to the previous month.
For month-on-month growth, you can calculate this every month and compare with the previous month. To see a trend, calculate it for a longer period (12-16 months).
For example,
Let's assume that your net MRR for January is $1000. In February, you added $800 in new MRR, $400 from subscription upgrades, and $100 from reactivation MRR. However, there was $200 of customer churn.
So your net MRR for February = (800+400+100)-200 = $1100
Net MRR Growth Rate = ((1100-1000)/1000)*100 = 10%
Common Net MRR Growth Rate Calculation Mistakes
Accurate calculation is essential for reliable reporting. RevOps and finance teams should avoid these common errors. Each mistake can distort your true growth picture and lead to poor decisions.
A frequent mistake is including one-time fees in the calculation. Setup fees, consulting charges, and other non-recurring payments are not part of MRR. Including them will artificially inflate your growth rate and create volatility.
Another error is mismanaging the timing of upgrades or downgrades. The change in MRR should be recognized in the period it becomes effective. Incorrect timing can shift growth between months and obscure real trends.
Finally, teams sometimes forget to account for all revenue movements. Net MRR growth must include new business, expansion, contraction, and churn. Overlooking any component, like reactivation MRR, results in an incomplete metric.
Industry Benchmarks for Net MRR Growth Rate
Net MRR Growth Rate benchmarks vary by company stage and market conditions. Based on recent industry data, here's what RevOps leaders should target:
Early-stage companies ($1M-$10M ARR): 15-25% monthly growth is healthy, with top performers exceeding 30%
Growth-stage companies ($10M-$100M ARR): 10-20% monthly growth indicates strong momentum
Scale-stage companies ($100M+ ARR): 5-15% monthly growth is typical for sustainable expansion
Companies with strong Net Revenue Retention above 110% are 1.5 times more likely to achieve high growth rates. Focus on retention fundamentals alongside acquisition for optimal results.
Pros and Cons of Net MRR Growth Rate
Pros:
Complete picture: Shows all revenue movements in one metric
Real-time insights: Quickly identifies changes in growth momentum
Actionable data: Highlights specific areas needing attention
Cons:
Monthly volatility: Can fluctuate due to timing of upgrades or cancellations
Seasonal bias: May not reflect annual trends in certain industries
Complexity: Requires accurate tracking of multiple revenue components
How to Increase Your Net MRR Growth Rate
RevOps leaders can improve Net MRR Growth Rate through three strategic levers beyond new customer acquisition:
Focus on increasing the expansion MRR
Expansion Monthly Recurring Revenue (Expansion MRR) is the additional monthly recurring revenue generated month-on-month from your existing customers. It doesn’t include new MRR acquired from your new customers.
An increase in the expansion revenue contributes to MRR growth with very little added cost. You can increase your expansion MRR by the means of:
Upsells - upselling is when customers move from a free plan to a priced plan or moving from a lower-priced plan to a higher-priced plan.
Cross-sells - cross-selling means the purchase of other additional non-core products offered by you.
Add-ons - purchasing of other recurring add-ons that are not part of the customer's current subscription plan.
Reactivation - Reactivating a canceled subscription.
Lower your churn rate
Churn rate is the rate at which your customers are canceling their subscriptions.
When your customer acquisition strategy is complemented with an effective churn mitigation strategy, boosting your MRR becomes achievable.
Begin with understanding where your churn is coming from. There are two types of customer churn.
Voluntary churn occurs when customers:
Pause the subscription
Downgrade to a lower plan
Cancel the subscription
When high-value customers signal intent to leave, add these retention strategies to your process:
Root cause analysis: Identify specific pain points driving the decision
Value demonstration: Show ROI data and unused features
Flexible pricing: Offer temporary discounts or plan modifications
Feature access: Provide complimentary premium features for three to six months
On the other hand, you have involuntary churn. This occurs when customers are churning due to payment failures and card declines. It’s important to have dunning mechanisms and smart retries in place to mitigate that.
Experiment with your value proposition
The perceived value of your product and your pricing should go hand in hand. To boost your MRR growth, you can experiment with your packaging and pricing to find the sweet spot that works best for your customers.
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Frequently Asked Questions About Net MRR Growth Rate
Difference between net and gross MRR growth rate
Gross MRR growth rate only measures new and expansion MRR. Net MRR growth rate provides a more complete view by also subtracting contraction and churned MRR. The net figure shows your true growth after all customer activity.
How often should I calculate Net MRR Growth Rate?
Calculate Net MRR Growth Rate monthly for operational dashboards and weekly executive updates. For board reporting, present quarterly trends with year-over-year comparisons to demonstrate sustained growth patterns and identify seasonal impacts.
Should I include one-time fees in this calculation?
No, exclude all non-recurring revenue including setup fees, professional services, hardware sales, and implementation charges. Only track subscription fees, usage-based recurring charges, and ongoing service fees to maintain accuracy.
How does this relate to net MRR churn rate?
Net MRR churn rate is a key component of the Net MRR Growth Rate calculation. Your net growth is the sum of new and expansion MRR, minus your net MRR churn. A high churn rate will directly reduce your overall growth rate.
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