The SaaS business model has been growing rapidly in recent years.

According to Gartner, the SaaS market is estimated to be over $195,208 billion.

However, running a successful SaaS subscription company can be overwhelming.

You need to manage and monitor your business performance consistently.

Besides, many aspects of SaaS subscription management exist, such as customer acquisition, conversion rate, revenue, etc.

What’s more?

To determine your subscription-based businesses’ financial performance and effectiveness, SaaS startups need to track different subscription metrics to know what’s working and what’s not.

CMRR and MRR are two of the key metrics to track.

But the two metrics are used to measure two different things. Besides, they can be used for different purposes.

Understanding them and their main differences can help to simplify and enhance subscription management for SaaS businesses greatly.

In this article, I’ll compare CMRR vs. MRR to help you understand what metrics to track, how to calculate each, and where to use them.

Let’s get started.

What is CMRR?

CMRR, or committed/contracted monthly recurring revenue, is a key metric used to evaluate the total company’s monthly recurring revenue for subscription business models.

The metric combines general monthly recurring revenue, adds new subscriptions and account upgrades, then deducts downgrades and canceled subscriptions.

By calculating CMRR, you can know your company’s progress and make future predictions and informed investment decisions.

This metric can be useful for companies that offer monthly or annual subscription plans.

Pro tip: To effectively manage your subscription-based business model, leverage these tools shared by Attrock.

What’s The Importance of CMRR?

To begin with, committed monthly recurring revenue enables accurate prediction of income than monthly recurring revenue (MRR)

Besides, the metric is useful within the company and externally. For instance, banks and other lenders use CMRR to determine how much credit to give to a company at any given period.

Current and potential investors can also leverage this metric to evaluate a company’s performance.

Internally, CMRR provides sales managers with a comprehensive picture of the company’s performance and makes precise sales projections.

This enables SaaS companies to make short-term and long-term plans for growth.

What’s Included in CMRR?

To determine how this metric is evaluated, you need to understand what’s included.

Here are the components of the Committed Monthly Recurring Revenue:

  • Beginning CMRR. The revenue at the beginning of the opening period.
  • New bookings. The new CMRR gained from new leads converted to paid customers on a contractual basis.
  • Guaranteed expansion(Expansion CMRR). The new CMRR you obtain from existing customers who have upgraded to a higher subscription plan or additional subscribers. This considers customers on a subscription plan that requires them to a higher plan to enjoy more features.
  • Churned CMRR. This metric represents anticipated churn from existing customers who fail to renew or cancel their subscription in a given month and lost MRR due to downgrades by existing customers.

How to Calculate CMRR

The formula for evaluating CMRR is simple.

You start with the existing CMRR at the start of the month, add new bookings plus expansion, then subtract churned CMRR.

Here is how to calculate CMRR:

What is MRR?

MRR is an acronym for Monthly Recurring Revenue. As the name suggests, this is a key metric for measuring the total amount of revenue generated from subscriptions each month.

By calculating MRR, you can gain valuable insights into your company’s monthly sales performance.

What’s the Importance of MRR?

MRR is a powerful metric for companies that offer subscription-based pricing plans. It clearly represents the amount you’re generating from monthly subscriptions.

It also portrays the health of your company, a crucial aspect investors look at before they invest in the company.

Additionally, measuring MRR can be beneficial for your subscription model business in the following ways:

  • It helps you evaluate your financial performance and set goals for your business growth.
  • It helps you to make sales projections and make better decisions.
  • It helps you determine where you should devote more or fewer resources.

What’s Included in MRR?

MRR is a straightforward metric to measure. To get a bigger picture of your company’s performance in terms of customer acquisition, retention strategies, and scaling, here are the components of MRR to keep an eye on:

  • New MRR. This involves the revenue generated from all new customers acquired in that month.
  • Upgraded MRR. This is the revenue generated from all customers who have upgraded their subscriptions from a lower plan to a higher plan.
  • Expansion MRR. This encompasses additional MRR gained from current customers in a month compared to the previous one.
  • Contraction MRR. This metric considers the MRR missed due to cancellations, downgrades, and deductions of recurring add-ons.
  • Reactivation MRR. The revenue gained from previously churned customers who have reactivated their subscriptions.
  • Churn MRR. Also known as Cancellation MRR, this metric represents the total amount lost due to canceled or churned customers in a given month.
  • Downgrade MRR. This metric measures the amount of reduction in MRR from current customers, not including cancellation MRR.

How to Calculate Monthly Recurring Revenue

The MRR formula is simple. To calculate this metric, you take the average revenue per subscriber (ARPU) in a given month and then multiply it by the total number of new subscribers.


Pro tip: If you’re considering starting a subscription-based business but aren’t sure how to go about the business formation process, this SmallBusinessHQ article discusses reliable business formation services you can leverage.

CMRR vs. MRR: What’s the Difference Between Them?

The difference between the two metrics is that MRR represents the revenue anticipated from customers each month. In contrast, CMRR provides a bigger picture of the financial health of your SaaS company.

Overall, the two metrics are vital as they all represent how well your company is doing and provide practical insights for growth.

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