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MRR vs ARR Explained
MRR (Monthly Recurring Revenue) is the predictable revenue your business generates each month from active subscriptions. ARR is simply MRR × 12.
MRR = Active Customers × Avg Revenue per Customer
Net New MRR = New MRR + Expansion MRR − Churned MRR
Churn Rate = Churned Customers ÷ Total Customers
Net New MRR = New MRR + Expansion MRR − Churned MRR
Churn Rate = Churned Customers ÷ Total Customers
Good vs. Bad Churn Benchmarks
- World-class SaaS: <0.5% monthly churn (<6% annually)
- Good: 0.5–1.5% monthly churn
- Acceptable: 1.5–3% monthly churn
- Danger zone: >3% monthly churn (losing 30%+ of revenue per year)
What is net negative churn?
Net negative churn occurs when expansion revenue (upsells and upgrades) from existing customers exceeds the revenue lost from churned customers. This is the holy grail of SaaS — you grow revenue even without new customers.