MRR: What is it?
Monthly Recurring Revenue (MRR) is your normalized monthly revenue from all your active subscriptions. To put it simply, it is the revenue your business generates each month out of active customers. Keep reading if you want to improve MRR in your company.
It’s worth noting that MRR consists of revenue that you may anticipate generating consistently rather than one-time sales.
How to Calculate MRR
Here below you can find a better explanation to understand the MRR concept:
- Let’s say you run a small SaaS called Radix and you want to find out your MRR month over month. The first step is to get the total number of subscriptions collected during the month (from start to finish) and then multiply that amount by the average subscription price.
MRR = Total Subscriptions x Avg. Subscription Price
- Calculating your growth rate percentage will help you establish your trend. Growth Rate % is calculated based on your monthly MRR variance.
MRR – Growth Rate % = (Current Month MRR / Previous Month MRR) -1
- After calculating your MRR, you can also calculate your Annual Recurring Revenue (ARR), which is simply a projection of how much revenue your business will generate during the running year based on the current month’s MRR.
ARR = Current Month MRR x 12
- As you can see in the table below, the MRR Growth Rate % from October to November was 5.88%, which equates to an increase of $2,691.This increase is due to new subscriptions or upgrades during that month.
- MRR Growth Rate % from November to December is – 22.84%, and you can see the percentage is negative, meaning that there was no growth during December, the MRR actually decreased by $2,691.
10 Tips to Improve MRR Performance
If you have been in the subscription-based SaaS industry for a while, you may have noticed that the MRR growth rate is not as promising as it used to be some years ago. Many of your peers seem to have plateaued, if not declined in terms of monthly recurring revenue. If you are looking to take your SaaS business to the next level, assessing and optimizing your MRR performance would be a good way to start. Below are ten tips to help you improve MRR performance.
1) Give Your Customers Exactly What They Want
Provide a service that customers want, make it easy for them to sign-up and start using the service, and deliver a superb experience. Create such a business model and you’ll be on your way to becoming a successful SaaS company. You will also be able to improve MRR.
Use customer surveys on a regular basis to know what your current users think about your product.
2) When The Time Is Right, Upsell to Improve MRR
Upselling is the process of promoting additional features or services to customers who are about to purchase your product. Consider strategies such as recommending a higher-tier subscription or protection package at the moment of sale.
3) Content Is Key: Write Blogs
Blogs are a great source of SEO traffic and can be repurposed for email blasts and social media. If your website does not have a blog, I highly recommend you begin one. Start with a plan on how many posts you want to publish a week, if you need any freelance writers to help, or if you will use guest bloggers or your own team. You may need to tweak your budget to cover any writer costs if it is not part of your current plan. This will help you improve MRR.
Read more of our blogs here !
4) Automate The Acquisition And Retention Of Customers
Increasing your MRR may need extensive collaboration across departments, including strategy and implementation. Regardless of the size of your company, automating some of your growth procedures will simplify your job and offer you more time to fine-tune your business plan.
5) Begin A Referral Campaign to Improve MRR
A referral program is an effective and affordable way to grow your startup’s recurring revenue. By incentivizing existing customers to refer new customers, referral programs help you acquire more paying customers and expand your business.
6) Make Use Of Perk-Based Promotions
Promotions can help a business attract customers, but if those customers don’t stick around, you might ultimately end up losing money. Try changing your strategy, such as pivoting to promotions from customers who are ready to buy, to launch promotions that improve MRR.
To build a campaign that considers your customers’ purchasing behavior, analyze their obstacles to purchase across the sales funnel. Consider promotions that will assist them in overcoming those obstacles while not affecting your bottom line.
7) Provide An Exceptional Customer Experience
As you grow and pay more attention to your SaaS business you need to be constantly looking for ways to improve retention. This can largely be done by continuously overdelivering for your customers. Whether this is through exceptional and personalized customer support, regularly improving your product or other means, it’s important to constantly ask yourself how you can improve the value your customers get from the product.
A Good Customer Retention = Great MRR
8) Increase And Improve The Quality Of Your Leads
Marketing is the starting point for lead acquisition and retention, but it is far from the end. You may also attract more qualified leads by customizing your offering for your most loyal customers.
Keeping customers for the long term MRR affects every aspect of your company. Begin with high-quality lead generating tools, then fine-tune your marketing and product to attract customers who will stick with you.
Maximize the leads that create revenue by understanding what drives your customer to convert.
8) Think Big: Enterprise Customers
In many cases, products that were actually designed for small businesses can be repurposed for enterprise-level needs. At first glance, this might not seem like a possibility as the customer needs of small businesses and enterprises are vastly different. But upon closer inspection, there is often some overlap.
Think big with your B2B product. Don’t lose sight of the larger companies that can benefit from your unique user experience.
10) Use a Data Science Platform to Track, Analyze, Forecast & Improve MRR
Business leaders depend on data to make the right decisions. But they don’t always have the right analytics tools to gather, cleanse and analyze their data. It’s easy to feel overwhelemed by the sheer volume of business intelligence applications on the market today.
More than just an efficient way to handle your data, a data science platform also helps you track and analyze MRR, as well as use forecasting tools for predicting future revenue and churn.
Use Radix to track, analyze and forecast MRR — understand the true health of your business, while turning analytics into actionable insights.
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