MRR and ARR
Monthly recurring revenue (MRR) is recurring subscription revenue normalized to one month under a documented policy. A $12,000 annual recurring subscription contributes $1,000 MRR in a simple normalization example. ARR as an annualized run-rate is MRR × 12. Neither is automatically recognized accounting revenue, cash received, or contracted backlog. Exclude one-time setup fees from recurring measures; document discounts and usage treatment.
The monthly bridge
Ending MRR = opening MRR + new + expansion + reactivation − contraction − churn. Use positive magnitudes for losses in this formula. Some billing tools store losses as negative movements; do not subtract those negatives again. Reconcile the result to the closing snapshot and isolate foreign-exchange effects or corrections rather than labeling them organic growth.
GRR: what you kept before upside
Gross revenue retention = (opening-cohort recurring revenue − cohort contraction − cohort churn) / opening-cohort recurring revenue × 100. Expansion and new customers do not improve GRR. Under a consistent simple cohort convention GRR cannot exceed 100%. It reveals revenue leakage that expansion can hide.
NRR: the same customers after expansion
Net revenue retention = (opening-cohort recurring revenue + cohort expansion − cohort contraction − cohort churn) / opening-cohort recurring revenue × 100 for the simple example here. NRR can exceed 100%. Exclude new customers. Use an explicit opening cohort and consistent beginning/ending snapshots. Some platforms use movement-based retention including reactivation; document that convention and never compare differently defined reports as if identical.
Handle reactivation deliberately
In this guide, a previously inactive customer returning during the month is not in the active opening cohort. Its $3,000 reactivation belongs in the company MRR bridge, but not this opening-cohort NRR. If an opening-cohort customer cancels and returns within the same window, reconcile its ending revenue and net movements consistently. Do not count the cancellation while omitting the return.
A worked example
Opening MRR $100,000. New MRR $20,000. Opening-cohort expansion $12,000. Reactivation outside the opening cohort $3,000. Opening-cohort contraction $4,000. Opening-cohort churn $6,000. Ending MRR is $125,000. Net new MRR is $25,000 and growth is 25%. Opening-cohort ending MRR is $102,000, so NRR is 102%. GRR is 90%. Ending annualized run-rate is $1,500,000. These are illustrative figures.
Why both retention measures matter
The example grows overall and retains more than 100% net revenue from the opening group, yet loses 10% of the opening revenue before expansion. Expansion is useful, but the $4,000 contraction and $6,000 churn still deserve investigation. New sales do not fix the meaning of GRR or NRR.
Keep the categories distinct
MRR is a run-rate; bookings are agreed commercial value under a defined convention; contracted revenue is governed by signed terms; recognized revenue follows the business accounting policy; pipeline is potential future business; and a forecast depends on assumptions. Do not add pipeline or unsigned opportunities into MRR.
Rules for a trustworthy dashboard
Fix the period, currency, timezone, customer identity, opening cohort, and subscription normalization policy. Show each movement, GRR, NRR, customer churn, and supporting cohort detail. Show N/A when a denominator is zero. Never silently replace unknown data with zero. Compare sources using reconciliations rather than forcing mismatched totals.
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