What is New MRR?

New MRR is monthly recurring revenue that comes from new customers.

How to Calculate New MRR

If you started a month with 10 customers, and at the end of the month you’ve got 12 – then, you gained 2 new customers. Let’s say your 2 new customers brought with them a total of $100 each in MRR. Then your New MRR for the month would be $100.

Note that I’m not counting any setup fees or additional one-time costs that make up Total Contract Value (TCV) – I’m only considering Monthly Recurring Revenue coming from the new customers.

You can use New MRR to monitor changes in your recurring revenue. You probably want to know what’s creating the bulk of your growing or decreasing income, right?

The benefits of New MRR and how to put it to good use

Keep your customer acquisition costs in check

New MRR is a great way to check your Customer Acquisition Cost (CAC). If you’ve got an acquisition cost that’s higher than your New MRR, you might want to consider adjusting your marketing budget so that your acquisitions don’t eat into your profit.

Put it to good use: Make sure your New MRR total for a month is HIGHER than the cost of acquiring all new business. Make sure you’re comparing New MRR to that month’s total acquisition costs (including the costs of sales, marketing, and digital growth efforts).

Motivate your sales and marketing teams

Since New MRR comes from new customers, you can also use this metric to track your sales and marketing performance. Monitoring the progress of your sales and marketing efforts is essential – first, because you’ve gotta know if what you’re doing is working and second, because the folks in those departments love a bit of motivation!

Put it to good use: To keep their sales and marketing teams motivated and in-the-know, some companies display metrics like New MRR in a highly visible place in the office (like on a big screen TV). This way, the team can see positive or negative mobility. We’re a remote team, but we’ve got our numbers published for anyone to see – find what works best for your team/culture.

Using New MRR to understand New Net MRR

New Net MRR uses several types of MRR to determine whether you lost more revenue than you gained within a month’s time.

New MRR: Additional MRR from new customers
Expansion MRR: Additional MRR from existing customers (also known as an “upgrade”)
Churned MRR: MRR lost from cancellations or downgrades

Net New MRR = New MRR + Expansion MRR – Churned MRR

If your Expansion MRR and New MRR are less than what you’ve churned, then my friend, you’ve lost money. If your Expansion MRR and New MRR are more than what you’ve churned, sweet! Maybe take the team out and celebrate the growth.


Upcoming Lesson

Setting Goals

Goals! Knowing what your MRR is, but setting realistic goals and taking steps to meet them is another. We’re going to show you how to do just th...

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