What Are MRR and ARR?
MRR (Monthly Recurring Revenue) is the predictable, normalized monthly revenue from active subscriptions. ARR (Annual Recurring Revenue) is simply MRR multiplied by 12. These are the defining metrics for subscription-based mobile apps.
MRR = Sum of all active subscription fees, normalized to monthly amounts
ARR = MRR x 12
If you have 1,000 users paying $9.99/month and 500 users on annual plans at $79.99/year, your MRR is:
- Monthly subscribers: 1,000 x $9.99 = $9,990
- Annual subscribers (normalized): 500 x ($79.99 / 12) = $3,333
- Total MRR = $13,323
- ARR = $13,323 x 12 = $159,876
Why MRR Matters More Than Total Revenue
Total revenue includes one-time purchases, refunds, and irregular income. MRR isolates the predictable, recurring portion that you can count on next month. This predictability is why subscription businesses command higher valuations than one-time purchase models.
For mobile apps transitioning from IAP to subscription models (a trend that accelerated through 2026), MRR growth is the clearest signal of success.
MRR Components
MRR breaks down into components that reveal where growth comes from:
New MRR
Revenue from brand new subscribers who started their first paid subscription this month.
Expansion MRR
Additional revenue from existing subscribers who upgraded to a higher tier, added features, or purchased add-ons. This is the engine behind negative churn.
Contraction MRR
Lost revenue from existing subscribers who downgraded to a lower tier but did not cancel entirely.
Churned MRR
Revenue lost from subscribers who canceled or failed to renew their subscription.
Reactivation MRR
Revenue from previously churned subscribers who came back and resubscribed.
Net New MRR
Net New MRR = New MRR + Expansion MRR + Reactivation MRR - Contraction MRR - Churned MRR
Positive net new MRR means the business is growing. Negative means it is contracting.
MRR Growth Benchmarks
| Stage | Monthly MRR Growth |
|---|---|
| Pre-launch to $10K MRR | 20-40%+ |
| $10K to $50K MRR | 15-25% |
| $50K to $200K MRR | 10-20% |
| $200K to $1M MRR | 8-15% |
| $1M+ MRR | 5-10% |
Calculating MRR from App Store Data
Commission Deduction
Apple takes 30% in the first year and 15% after (for Small Business Program developers, it is 15% from day one). Google offers 15% for the first $1M in annual revenue.
- Gross MRR: Full price before commission. Useful for comparing with benchmarks
- Net MRR: After commission deduction. This is what actually hits your bank account
Always specify which you are reporting.
Free Trials
Users on free trials are not MRR until they convert to paid. However, tracking "trial MRR" is useful for forecasting.
Annual Plan Normalization
A $99.99 annual subscription should be divided by 12 ($8.33/month) when calculating MRR. Do not count the full annual amount in the month it is charged.
Key MRR Ratios
Quick Ratio
Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
| Quick Ratio | Assessment |
|---|---|
| Below 1 | Contracting. Urgent action needed |
| 1 to 2 | Churn nearly offsetting growth |
| 2 to 4 | Healthy growth |
| Above 4 | Strong growth with efficient retention |
Net Revenue Retention (NRR)
NRR = (Start MRR + Expansion - Contraction - Churn) / Start MRR x 100
NRR above 100% means existing customers generate more revenue over time even without acquiring new ones. This is the gold standard for subscription businesses and signals true product-market fit.
Common MRR Mistakes
Counting one-time purchases. Consumable IAP, tips, and one-time unlocks are revenue but not recurring. Keep them separate from MRR reporting.
Not normalizing annual plans. Booking $100K from annuals in December and $5K in January creates misleading month-over-month trends.
Ignoring refunds. Both Apple and Google allow refunds. Subtract refunded subscription revenue from your MRR calculation.
Double-counting trial users. Until a trial converts to a paid subscription, it is not MRR. Track trial metrics separately.