Monthly Recurring Revenue (MRR) is an important metric in any subscription business (SaaS-based companies). MRR is a measure of the predictable and recurring revenue components of your subscription business. It will typically exclude one-time and variable fees, but for month-to-month businesses could include such items. As a SaaS company, once you acquire a new customer you get a recurring revenue. Based on the number of customers you acquire, your MRR gets calculated accordingly.
The churn rate is calculated as a percentage of customers leaving your service or rather a rate at which your company losses subscribers during a given period of time. It is calculated by dividing the number of customers who left your service at the end of a period by the initial number of customers you started with.
Collectively, MMR churn rate measures the erosion of SaaS monthly recurring revenue (MRR). In subscription billing, using MMR churn rate you can track the performance metrics with the help of features like informative analytics. The MMR churn rate is an extension of the SaaS customer churn rate calculated by substituting monthly recurring revenue in place of the number of customers.
For example, if your business had 500 customers with MMR of $5M at the beginning of a year. By the end of the year, 50 customers canceled their subscription with a loss of $500k in MMR. The annual MRR churn rate would be calculated as 10%. This is really important if you run a B2C SaaS business where revenue is generated by monetizing users through advertising or such. However, B2B SaaS companies generate revenue from direct subscription sales. Based on MMR, you can align your business decisions.