Monthly Recurring Revenue measures the current revenue the company generates in a given month.
For companies that sell subscriptions or services Monthly Recurring Revenue (ARR) is calculated by taking the total contract value and dividing it by the number of months. For example, if Acme Corporation sells a 2 year subscription to Widgets Inc for $48,000 then the subscription represents:
$48,000 / 24 = $2,000 of MRR
Only recurring services should be used when calculating MRR. One time fees such as training days, implementation fees, and customization fees should not be included unless they renew with the subscription.
MRR is an important metric for showing company growth. When reporting on MRR over time it can show how a company is growing, or if there is dollar based churn.