MRR Growth Rate Calculator

How the figure is built

MRR growth rate is (ending MRR − starting MRR) ÷ starting MRR × 100 for the period. Compounded monthly it becomes the growth rate the business is actually running at.

Net new MRR, the absolute change; is frequently more useful than the rate, since the rate declines automatically as the base grows.

The components are new, expansion, contraction and churned MRR, and net new is their sum.

In practice

MRR rising from $55,400 to $58,000 is a 4.7% monthly growth rate, or $2,600 of net new MRR.

Decomposed: $6,200 new, $2,200 expansion, −$4,060 churn, −$1,740 contraction. The business added $8,400 and lost $5,800.

At 4.7% monthly, compounded, MRR would reach $101,000 in twelve months. That assumes the rate holds, which it will not, the same $2,600 of net new against a larger base is a smaller percentage each month.

Adding a constant $2,600 a month instead gives $89,200 after a year, which is the more realistic projection unless acquisition scales with the business.

The limitations

Percentage growth declines mechanically as the base grows, so a business adding the same absolute amount every month shows a falling growth rate that looks like deterioration and is arithmetic.

Small bases also produce spectacular percentages: growing from $2,000 to $3,000 is 50% and is not comparable to the same rate at $58,000.

Putting it to use

Track net new MRR alongside the percentage, since the absolute figure shows whether the acquisition engine is actually improving.

Then forecast with the components rather than the rate. New MRR depends on marketing capacity, churn on the base size, and modelling them separately produces far better projections than compounding a single percentage.

The T2D3 convention and where it applies

The venture convention of tripling twice then doubling three times describes a trajectory from roughly $1m to $100m of ARR, and it is the standard against which fast-growing software businesses are judged.

It is achievable only with substantial external funding and a large addressable market, and it is a poor benchmark for a bootstrapped business or one serving a defined niche.

A business growing 4.7% monthly is compounding at 74% annually, which by that standard is unremarkable and by almost any other is excellent. Choosing the right comparison matters, because a bootstrapped business measuring itself against a venture trajectory will conclude it is failing while generating cash and holding its customers.

Separating the growth rate into contribution from new business and from the existing base shows which engine is driving it, since a business growing purely through expansion has a different risk profile from one growing through acquisition.

The two also respond to entirely different investments, so the split determines where effort should go.

Comparing the rate against the same month last year controls for seasonality in a way month-on-month comparison cannot, particularly for consumer subscriptions with strong January effects.

Charting net new MRR against acquisition spend shows whether growth is becoming more or less efficient, which the growth rate alone cannot reveal.

Reporting the rate alongside the absolute figure prevents the familiar distortion where a larger business appears to be slowing while adding more revenue than ever.