MRR and ARR
MRR and ARR
Founders can now access real-time and accurate MRR, ARR, Churn Rate, and Retention Rates instantly in Puzzle.
This eliminates the need for time-consuming manual calculations and system cross-referencing.
Puzzle’s simple MRR and ARR schedules bring automated revenue insights to life in an easy-to-understand way.
MRR, Monthly Recurring Revenue, is a useful metric for companies that use subscription-based billing. Knowing MRR helps them predict future revenue, identify growth trends, pinpoint challenges, and make insightful business decisions.
In Puzzle, MRR is calculated as:
MRR =
Monthly Stripe subscriptions
+ 1/12 of the value of annual subscriptions in each month
+ 1/4 of quarterly subscriptions.
Puzzle uses subscription-based MRR. MRR is the aggregate value of all recurring subscriptions active that month. Note that Puzzle MRR is distinct from the accrual revenue in Puzzle. A subscription for $30 that began on the 10th of the month would contribute $30 to MRR, but only ~$20 to Accrual Revenue.
ARR, Annual Recurring Revenue, is a derivative of MRR, which Puzzle calculates by multiplying MRR times 12.
Why are MRR and ARR important?
Why are MRR and ARR important?
MRR and ARR metrics provide proactive insights into a company’s performance to guide decisions for success. They are also pivotal for fundraising and investor due diligence. Growing MRR signifies revenue growth potential. This influences decisions for fundraising, hiring, and business strategies. Conversely, declining MRR can signal customer attrition, which should prompt strategic reassessment.
How to understand Puzzle’s automated, real-time MRR and ARR schedule:
Beginning of Period MRR/ARR:
Value (or count) of Stripe subscriptions at the beginning of the month. This will always equals the prior month’s “End of Period” amount.
New MRR/ARR:
Value (or count) of new first-time customers who began Stripe subscriptions during the month. This is a good insight to understand general customer growth.
Reactivation MRR/ARR:
Value (or count) of customers who previously ended Stripe subscriptions but returned during the current month.
Expansion MRR/ARR:
Value (or count) of customers who increased the value of their Stripe subscriptions during the month, less the value of their existing subscriptions. This represents the increase in revenue per customer.
Contraction MRR/ARR:
Decrease in value (or count) of customers who decreased the value and downgraded their Stripe subscriptions during the month. This does not include customers who canceled their subscriptions.
Lost MRR/ARR:
Value (or count) of customers who ended their Stripe subscriptions during the month.
MRR/ARR Gross Churn Rate
The amount of “Lost MRR” during the period divided by Beginning MRR.
MRR/ARR Gross Retention Rate
This is the inverse of Gross Churn. This is Beginning MRR less “Lost MRR” Divided by Beginning MRR.
MRR/ARR Net Churn Rate
“Lost” + “Expansion” + “Contraction” revenue during the period divided by Beginning MRR.
MRR/ARR Net Retention Rate
The inverse of Net Churn. This is Beginning MRR less “Lost” + “Expansion” + “Contraction”, divided by Beginning MRR. Note, it is possible for this to be greater than 100%.