MRR Growth formulas (with examples)

“MRR Growth Rate” sounds simple, but people often mix up period growth (over a quarter, year, or month) with monthly equivalent growth (a comparable MoM number). This calculator gives you both, plus an annualized view for quick benchmarking. The formulas below are the exact ones used in the results panel — no hidden logic.

If your previous MRR is P and your current MRR is C, your period growth rate is:

• Growth % (period) = (C − P) ÷ P

Example: If you went from $20,000 to $23,000 in 1 month: (23,000 − 20,000) ÷ 20,000 = 0.15 → 15% growth.

If your period is longer than 1 month (say you’re comparing end-of-quarter MRR), a simple division can mislead you. The compounding-friendly way is to compute the monthly rate that would compound to the same result:

• MoM equivalent = (C ÷ P)^(1 ÷ months) − 1

Example: You grew from $20,000 to $26,620 over 3 months. The ratio is 26,620 ÷ 20,000 = 1.331. The MoM equivalent is 1.331^(1/3) − 1 ≈ 0.10 → about 10% MoM. This is powerful because it turns “quarterly growth” into a comparable monthly number.

If you have a MoM equivalent, you can annualize it by compounding across 12 months:

• Annualized growth = (1 + MoM) ^ 12 − 1

Example: 10% MoM annualizes to (1.10)^12 − 1 ≈ 213.8%. Annualization helps you quickly communicate “speed,” but it assumes the monthly growth rate holds all year — so treat it as a directional benchmark, not a promise.

If you enter the optional components, we compute Net New MRR as:

• Net New MRR = New + Expansion − Contraction − Churn

This breakdown is how many teams run weekly growth reviews. It helps you diagnose: are you winning because you’re adding customers, expanding accounts, or because churn is low? Or is churn quietly eating growth?

The calculator also compares your implied “expected current MRR” (P + Net New) to your reported current MRR. If they don’t match, you’ll see a small reconciliation note. Mismatches are common due to: (1) proration timing, (2) usage-based charges, (3) refunds and credits, (4) data lag, or (5) definition differences (gross vs net MRR).

How to interpret your result

There is no universal “good” growth rate — it depends on stage, market, and retention. Still, having a rough interpretation framework helps you decide what to do next.

• < 0% MoM: shrinking (urgent churn / pipeline diagnosis)
• 0–3% MoM: slow (often early product-market fit work)
• 3–8% MoM: healthy (many sustainable SaaS businesses)
• 8–15% MoM: fast (strong momentum; watch capacity and churn)
• 15%+ MoM: hypergrowth (rare; ensure retention + cash discipline)

The most useful comparison is your own trend. If MoM equivalent improved from 4% → 6% while churn fell, that’s a real signal. If growth is flat but Net New is high and churn is also high, you might be on a treadmill.

One quick way to detect treadmill growth: look at how much of Net New comes from New + Expansion versus how much is lost to churn. If churn is a large chunk of your gains, growth can stall even when acquisition looks strong. That’s why the Net New breakdown is included — it makes “what’s happening” visible.

Examples you can copy into a weekly update

These are real-world ways people use MRR growth numbers to communicate clearly (and avoid confusion). You can copy/paste the phrasing and swap in your numbers.

“We grew MRR from $20k to $23k this month: +15% MoM. Net New MRR was $3.0k (New $5.0k + Expansion $1.2k − Contraction $0.6k − Churn $2.6k). Biggest lever next month: reduce churn.”

“Over the last quarter we grew from $50k to $61k (period growth +22%). That’s about 6.8% MoM equivalent. If we can maintain that, annualized pace is roughly 120%+.”

“Our current MoM equivalent is 4.5%. Our target is 8%. That means we need approximately $X more MRR next month to hit the target. Primary experiments: pricing test + upsell motion.”

Notice how each example includes both (1) a growth rate and (2) a next action. That combination is what makes the metric useful. A number without a decision is just trivia. This calculator tries to bridge that gap by showing your target gap automatically.

Frequently Asked Questions

• What’s the difference between MRR growth and ARR growth?

  ARR is usually 12 × MRR (for pure subscription revenue). If you calculate MRR growth, ARR will grow at the same percentage as long as the ARR definition is consistent (no one-time revenue mixed in).

• Should I use gross MRR or net MRR?

  Use whichever your team reports consistently. “Gross MRR” usually counts subscription revenue before adjustments; “net MRR” may subtract refunds, credits, or discounts. Consistency matters more than choosing the “right” label.

• Why does my Net New breakdown not match (Current − Previous)?

  Common reasons: proration timing, mid-cycle plan changes, usage-based charges, currency conversion, refunds/chargebacks, or definitions that treat some items outside MRR. Small gaps are normal — use the mismatch as a prompt to reconcile.

• What if previous MRR is zero?

  If you’re starting from zero, a percentage growth rate is undefined (you can’t divide by zero). In that case, focus on absolute MRR added and track growth once you have a baseline. This calculator will show a friendly note instead of a misleading %.

• Is annualized growth “real”?

  It’s a projection. Annualizing assumes the monthly growth rate continues for 12 months. It’s useful for a quick “speedometer,” but not a guarantee. Use it for comparison, not forecasting without context.

• How can I improve my MRR growth rate fastest?

  Usually by pulling one of three levers: (1) increase qualified pipeline (new MRR), (2) improve expansion motion (upsells), and/or (3) reduce churn and contraction. The breakdown section is designed to point you to the highest leverage lever.

Common pitfalls (so you don’t get tricked)

• Mixing time windows: Use comparable endpoints (end of month vs end of month).
• Counting one-time revenue: Keep “MRR” recurring. Put one-time services elsewhere.
• Ignoring churn: High acquisition can hide a retention problem.
• Over-trusting annualized: Treat it as a speedometer, not a forecast.
• Not defining MRR: Gross vs net, usage vs subscription — define it once and stick to it.

If you want a single “board slide” number, use MoM equivalent. If you want to diagnose, use Net New breakdown.