MRR (monthly recurring revenue)

A hundred customers paying $50 a month is $5,000 MRR. Its value is predictability: you can hire, spend and plan against it in a way one-off sales never allow.

Recurring revenue is also why software businesses sell for multiples of annual revenue while service businesses sell for multiples of profit. Buyers pay for predictability.

The headline hides four numbers, and only the breakdown is informative: new, expansion, contraction and churned. A business adding $5,000 of new MRR while losing $4,000 to cancellations is growing at $1,000 a month and is about to stall, while its chart still points upwards. Track the four separately or you will diagnose a retention problem as a marketing one.

The figure buyers ask for is net revenue retention: what last year's customers pay this year, before counting any new ones. Above 100% means the existing base grows on its own and marketing compounds. Below 90% means the business has to sell hard simply to stand still, which is a completely different company at the same revenue.