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How to Calculate Committed MRR (CMRR)

Updated: Dec 20, 2023


Calculate committed MRR for SaaS

In another post, we looked at the importance of tracking monthly recurring revenue (MRR) for SaaS companies. It's a basic but critical calculation that startups don't always get right, so it's worth checking your methodology if you haven't, before diving into other recurring revenue metrics.


Tracking various types of MRR can help SaaS entrepreneurs get a better read on the overall performance and trends of their company. These include:


  1. New Business MRR

  2. Expansion MRR

  3. Contraction MRR


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

Adding recurring service package

END OF Q2

$770,000

99

$820,000

99


As you can see in this example, CMRR has a more positive outlook than MRR. But there will be cases where CMRR can show a less favorable outlook, especially if expected churn is much higher than new contracts entering production.


Keeping track of CMRR

As with any SaaS metric, there is no one industry definition for measurement. As you begin to track this metric, be sure to document how you’re calculating this number—and remain consistent over time. Having thorough documentation of your accounting will make it easier when you have to discuss this metric with potential investors and lenders.

 

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