MRR and ARR

Also called Monthly recurring revenue, Annual recurring revenue, Recurring revenue

Predictable revenue that arrives every month or year without being resold. Valued far higher than one-off sales.

What it means

Monthly recurring revenue is the total contracted, repeating revenue in a month. Annual recurring revenue is normally MRR multiplied by twelve.

Only genuinely recurring revenue counts. One-off setup fees, professional services and hardware sales do not, however reliable they feel.

Why it matters

Recurring revenue is worth more per pound than one-off revenue because it is predictable, so it makes planning possible and it materially increases valuation.

It also changes the shape of the business: you are no longer starting each month at zero, which is the single largest quality-of-life difference between a project business and a subscription one.

What it looks like in practice

Break the movement down: new, expansion, contraction and churned. That decomposition tells you far more than the headline figure — flat MRR can hide heavy churn offset by heavy acquisition, which is an expensive way to stand still.

Even traditionally project-based businesses can build a recurring layer: maintenance, support, retainers, monitoring.

What to watch out for

Counting annual contracts as ARR before they are signed, or counting a twelve-month contract that has three months left as full ARR.

Confusing ARR with cash received. Monthly billing and annual billing produce the same ARR and very different cash flow.

Where to get proper advice

Your accountant on how the revenue should be recognised in the accounts, which is a separate question from how you report it internally.