What Is MRR Growth Rate?
MRR Growth Rate measures how fast your monthly recurring revenue is expanding, and is the single most watched momentum indicator for early-stage SaaS.
Key Takeaways
- MRR Growth Rate = (MRR this month − MRR last month) / MRR last month × 100
- A 10–15% monthly rate compounds to roughly 3–5× annual growth
- Decompose growth into new, expansion, contraction, and churn components
- Smooth month-to-month noise with a 3-month rolling average
The formula and what it tells you
MRR Growth Rate = (Current MRR − Prior MRR) / Prior MRR × 100. A result of 10% means your recurring revenue base grew by 10% in one month. At that rate, you double roughly every 7–8 months. For early-stage SaaS (under £1M ARR), monthly growth rates of 10–20% are considered strong. As you scale, sustaining high percentages becomes harder — the absolute pounds growing each month matter more than the percentage.
Decomposing growth rate
Headline MRR growth combines multiple forces. New MRR from fresh logos pulls it up. Expansion MRR from upgrades adds to it. Contraction and churn drag it down. A business showing 8% MRR growth could be acquiring strongly but churning rapidly — hiding a serious retention problem. Breaking the rate into its components (new, expansion, contraction, churned) and monitoring each separately gives you actionable intelligence rather than a single number that masks underlying issues.
Interpreting volatility
Month-to-month MRR growth can be noisy, especially for small SaaS businesses where a single large deal or a churned anchor customer swings the number. A 3-month rolling average smooths this volatility and reveals the true trend. Watch for deceleration — a growth rate that was 15%, then 12%, then 9% signals a structural issue even if the business is still growing. Deceleration caught early is far easier to address than deceleration noticed after several quarters.
Setting targets
Work backwards from your ARR target. If you want to reach £500k ARR from £200k in 12 months, you need roughly 7.5% monthly MRR growth sustained over the year. Break that target into its components: how much new MRR do you need per month from sales, and how much expansion can you realistically expect from your current base? This bottoms-up approach makes growth targets concrete and assigns accountability to specific teams rather than treating revenue as a single abstract goal.