SaaS MRR (monthly recurring revenue) Guide: Running a Health Check on Your SaaS Business
What is SaaS MRR?

Is the monthly billing option beneficial for you? Here are the pros and cons
Strengths
- It becomes much easier for your sales team to close sales and acquire paying customers as a monthly subscription fee is usually a small amount.
- You have the opportunity to target a larger number of businesses as startups and companies with low budgets are more likely to go for monthly, rather than annual subscriptions.
- You don’t make an additional discount as you’d do in case of annual billing.
Weaknesses
- You have to invest double efforts to retain your customers. Those efforts include active communication, tracking and analyzing their behavior while using your software. Customer churn prediction tools usually require expenses too.
- Sometimes a customer will walk away before you win back the costs you invested to acquire him/her (your CAC is higher than customer LTV).
- SaaS companies lose customers because of failed payments too and that’s a pity.
Why is MRR an important metric for your SaaS business health check?
- predictability – you know how much cash to expect next month
- flexibility – you know how much money you can afford to spend
- accuracy – you know all the data you have is based on real data
How to calculate your SaaS MRR? (formula+example)

How many types of MRR exist?

SaaS MoM (Month on Month growth): What’s considered a “good rate”?

Competition in your niche
Are you in a highly competitive niche full of “big fishes” or your software is designed for a specific solution and has only a few competitors?
For example, if your software is a CRM (Customer Relationship Management) tool, you maybe know that Salesforce and HubSpot are the main leaders in this niche.
But if your software is, for example, customer engagement software it’s hard to mention obvious leaders who have conquered the largest market share.
Maturity of your business
Junior companies tend to grow faster than senior companies. In your company’s growth stage, you should provide a constant increase for your business so that in the maturity stage you are confident about your customer base and cash flow.
You should establish that solid and strong foundation for your startup to enjoy stability and avoid failure in your future business activities.
Your profit and loss (P&L)
If you don’t pursue ambitious goals and even modest growth is growth for you, then have a look at your cost/benefit ratio.
If you are Ok with your current team size, want to continue with the same number of customers and your current monthly profit exceeds your current expenses (including salaries, marketing, and software maintenance budget), then your current MRR probably is just enough for you.
And whatever your MRR growth rate is, you don’t have to match it with what others recommend you.
But think twice. Isn’t there a possibility that your current customers will prefer your competitor over your company or your CAC (customer acquisition cost) will reach a higher amount?
If something goes wrong and you don’t have enough resources to handle the situation, your losses will exceed your profit.
Now let’s move to the essence of the topic. What’s the minimum MoM growth rate you should strive to ensure? Well, the short answer is: if you ensure a two-digit number – that is 10% MoM growth – already sounds good and you are going in the right direction.
Jason Lemkin, an expert on SaaS-related topics, writes that you can reach $1m ARR in 6 months or 4 years – that’s not a disaster. And growing 12-15% per month is enough even when you reach $1m ARR.
To sum up, MoM growth that is equal to or higher than 20% is something happening rarely, being typical for a small number of businesses.
15% MoM growth is something great and you need a great product to achieve that number.
10% is your minimum target if you want your business to move forward rather than stay in the same place.
How to improve your SaaS MRR?
Grow your leads extensively and convert them with strategy
You can work on generating more leads and closing more sales with your existing subscription plans. It means you simply work harder and smarter on your
SaaS lead generation efforts and keep your prices untouched.
Don’t focus on the number of people who will download a single eBook or cheat sheet and walk away. Urge them to subscribe to your newsletter too.
Create an email flow for each resource that is downloaded, educate them about your product, and eventually offer them to sign up for a free trial or contact your team.
Monitor, score and analyze customer engagement to predict churn
You develop a customer retention strategy that will allow you to create additional incentives for your customers to continue using your services and help you reduce the churn rate.
Have you heard of the customer engagement score? Here is how it’s done. You determine the activities that are typical for engaged customers and activities that point out to churn. You can give 1 point to a “churn-oriented” step and 10 points to the positive step your customers take.
After all, when a customer’s engagement score is below, for example, 70, they need special attention and support.
InnerTrends is one of the similar tools. The software shows how many users have high, medium, low and very low engagement, how many points X group of customers has gained and how much percent is the churn risk for X group of customers.

Incentivize your customers to recommend you to colleagues and friends
You can develop a customer referral program and encourage your customers to tell their interested friends about your company. As a result, you offer a symbolic remuneration (1-month free, discount or access to training) both to your customer and his/her friend who became your paying customer.
For example, DropBox was offering 16 GB free space if a user invited his/her friend to DropBox or PayPal was paying $20 to every customer once they recommended PayPal to another contact. If you want to get acquainted with more examples, you can check out our article 5 Examples of Excellent SaaS Customer Referral Programs.
Grow your revenue intensively with upselling strategy
You can offer more features to your existing client base. We talk about upselling.
Upselling: you offer your customers to upgrade their subscription plan and consequently pay more. In this case, you should remind your customers about the additional value they will receive from your higher plan.
Raise your prices (carefully)
This is another option for increasing your revenue but you should care about some details. When you raise your price, it’s supposed that you add more features to your software or improve existing ones.
Because your customers will probably feel disappointed with your pricing strategy once you demand more and don’t provide anything extra.