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How to Calculate Committed MRR (CMRR)

In another post, we looked at the importance of tracking monthly recurring revenue (MRR) for SaaS companies. Tracking various categories of MRR can help entrepreneurs get a read on the overall performance and trends of their company.

  1. New Business MRR

  2. Expansion MRR

  3. Contraction MRR

  4. MRR Churn

If you’re already tracking these metrics, you’re well on your way to adding a more forward-looking metric based on MRR: committed monthly recurring revenue (CMRR).


What is CMRR?

CMRR looks at current MRR, which is defined as (New Business + Expansion – Contraction – Churn), then adds in signed contracts going into production and subtracts out revenue likely to churn within that period.


Why CMRR is important

CMRR is not only useful internally; it is also often used by banks and other lenders as a baseline number in determining how much credit to extend to a business at any given point in time. For example, the amount of revolving credit extended to SaaS companies is often based on a multiple of CMRR. The multiple is often rooted in customer retention rates.


Using CMRR and other customer-oriented SaaS metrics allows the credit line to grow or shrink based on the performance of the company, ensuring that the lender is not taking an outsized risk and your company is not taking on more debt than it can handle.


How to Calculate CMRR

Here’s a simple formula you can use for determining CMRR:


CMRR = MRR + Signed Contracts – Expected Churn


The example below helps illustrate the difference between MRR and CMRR.

Detailed MRR

Customers

CMRR

Customers

Notes

END OF Q1

$750,000

100

$750,000

100

New Business

Subtotal

$50,000

$40,000








$90,000

1

1








2

$50,000

$40,000

$50,000



$40,000




$180,000

1

1

1



1




4

New cust

New cust

Contract signed - not billed

Contract signed - not billed

Churned

$90,000

2

$180,000

4

Subtotal

$100,000

$20,000


$10,000


$130,000

-1

-1


-1


-3

$130,000

$20,000


$10,000


$130,000

-1

-1


-1


-3

​Lost to comp

Service not wanted

Lost to comp

Contraction

Subtotal

$5,000


$5,000


$10,000

$5,000


$5,000


$10,000

Renewal discount

Reducing users

Expected Churn

Subtotal

$30,000



$10,000



$40,000

-1



-1



-2

Not returning calls for renewal

Continuing technical issues

Expansion

Subtotal

$50,000


$20,000





$70,000

$50,000


$20,000





$70,000

Increasing users