About this tool
MRR growth simulator, explained
This MRR growth simulator projects your monthly recurring revenue from where you start, the new MRR you add, churn, contraction and expansion. It shows the matching ARR, when you reach a target, net revenue retention and how much of each month's signups you keep.
How to use it
- 1Pick a preset (Early SaaS, Growing SaaS or Scale-up), or set Starting MRR and New MRR each month yourself.
- 2Set New MRR growth, Expansion, Churn and Contraction, all as percentages per month.
- 3Add Revenue per customer for a customer count, a Target MRR, and the First month of the plan.
- 4Choose a horizon of 12, 24, 36 or 60 months and switch between the MRR curve, Movements and Table.
How it works
How the projection works
Each month, churn, contraction and expansion are percentages of the starting MRR, and new MRR is a fixed amount that can itself grow each month. Revenue won in a month joins the base for the next one, so it starts churning then. ARR is the ending MRR times 12.
Because churn and contraction remove a percentage while new MRR is a fixed amount, growth slows as the base gets bigger. When new MRR does not grow and churn plus contraction is higher than expansion, MRR approaches a ceiling equal to new MRR divided by that net rate. With the starting values ($20,000 MRR, $4,000 of new MRR a month, 3% churn, 1% expansion) the ceiling is $200,000. After 24 months MRR reaches about $89,200, an ARR of about $1.07 million, and the $100,000 target arrives in month 30.
Net revenue retention is the share of a month's revenue still there 12 months later once churn, contraction and expansion are applied: about 78% here, and 62% after 24 months in the cohort tiles. The quick ratio divides what the last month gained (new plus expansion) by what it lost (churn plus contraction), about 1.9 here.
MRR next month = MRR × (1 − churn % − contraction % + expansion %) + New MRR
When to use it
Ways people use it
Set a realistic revenue goal
Enter a Target MRR and adjust new MRR until the month it is reached matches your plan.
Show the value of reducing churn
Lower churn from 3% to 2% on the starting values and MRR after 24 months rises from about $89,200 to $101,400.
Plan pricing and upsells
Raise expansion or lower contraction to see what upgrades, seat growth or fewer downgrades do to the curve. The Movements view shows each force month by month.
Build an investor or board update
Print or PDF gives the summary and the monthly table with the assumptions in plain sight. Download CSV sends the same table to a spreadsheet.
FAQ
Questions people ask
What is MRR?
Monthly recurring revenue is the predictable subscription revenue a business earns each month, normalized to a monthly amount. Annual plans are usually counted as one twelfth of their yearly value. One-off fees are left out.
How do you calculate ARR from MRR?
ARR, annual recurring revenue, is MRR multiplied by 12. It describes the yearly run rate of current subscriptions, not revenue already collected over the past year.
What is the difference between churn, contraction and expansion?
Churn is recurring revenue lost when customers cancel. Contraction is revenue lost when customers stay but downgrade. Expansion is extra revenue from existing customers, through upgrades, more seats or add-ons. When expansion is larger than churn and contraction together, existing customers grow revenue on their own.
Why does my MRR stop growing even though I keep adding customers?
Churn removes a percentage of a growing base, so the amount lost each month rises as MRR rises. At some point the monthly loss equals the new MRR you add and growth flattens. Reducing churn, increasing expansion or growing new MRR each month lifts that ceiling.
Is monthly churn the same as yearly churn divided by 12?
No. Monthly churn compounds: at 3% a month with nothing else, a cohort keeps 0.97 to the power of 12, about 69%, after a year, so it loses about 31% rather than 36%. Use the monthly rate you actually observe in this simulator.