The stability of income has become a sine qua non condition to attract capital, in a context where growth alone is no longer enough to convince. Investors now favor models based on recurrence, considered as a key indicator of economic resilience. This is precisely what the MRR (Monthly Recurring returned) and the arr (annual recurring returned) measure.
Definitions: two indicators linked, but for distinct uses
- MRR (Monthly Recurring Revenue) : Recurrent monthly income on date, calculated excluding exceptional or punctual income (installation costs, non -contractual services, consulting income).
- Arr (annual recurring income) : projection of the MRR on an annual basis (MRR X 12), used as standardized measure of the commercial performance of a recurring model.
These two indicators apply to companies with contractual recurring income (SaaS, subscriptions, managed services, etc.), they exclude non -predictable or seasonal flows.
Why investors favor them
1. Revenue predictability
A high and growing replacement makes it possible to anticipate the generation of future cash, which facilitates financial modeling and reduces uncertainty for investors.
2. Direct reading of the commercial traction
The monthly evolution of the MRR makes it possible to quickly identify the dynamics of growth, attrition or expansion, it constitutes an execution barometer.
3. Standardized valuation base
In SaaS or Subscription models, valuations are often based on a multiple arr, adjusted according to growth, gross margin and customer retention.
4. Post-2022 prudence reflex
In a cycle marked by the end of hypercroissance and return to fundamentals, recurrence reassures: it signals an economic model controlled and less exposed to cycle effects.
Operational interpretation: beyond the gross figure
It is essential to segment the MRR to understand the underlying dynamic:
- New MRR : income generated by new customers
- MRR expansion : additional income from existing customers (Upsell, Cross-Sell)
- Churned MRR : income lost due to terminations
Standard formula:
Mrr net = new mrr + expansion mrr – churned mrr
This decomposition makes it possible to finely control the commercial strategy and to identify the levers to activate: acquisition, loyalty, upmarket.
Sectoral benchmarks and credibility thresholds
| Stadium | MRR / | MRR growth ratio | Comments |
|---|---|---|---|
| Pre-seed | MRR> 5 K € | Monthly growth> 10 % | Demonstration of the Product-Market Fit |
| Seed | MRR> 20 K € | 5 to 10 % monthly | Beginning of commercial structuring |
| Serie A | ART> 500 K € | Demonstrated scalability | Waiting for a short -term profitable economic model |
| Serie B+ | AR> 1 M € | Growth> 100 %/year | Multiple valuation |
Note: a monthly churn rate greater than 5 % is often perceived as concerning by the Early-Stage funds.
Limits and adaptations according to the models
The MRR/SIR indicators apply mainly to contractual income models. In transactional, events or e-commerce activities, their relevance is limited. Alternatives can then be used:
- Customer reset rate (Repeat Rate)
- A medium recurrent basket (Basket Per User Average)
- Monthly activation rate
It then becomes strategic to structure an additional recurring offer (maintenance, subscription, support) to meet market expectations.
Recurrence is a competitive advantage, and transforms growth into assets
The MRR and the ROP reflect much more than amounts, they embody the maturity of a business model, its ability to project value over time, and the solidity of its operational execution.
See you tomorrow to talk about Burn Rate, which your cash says about your survival.
