8 Proven Strategies to Boost Net MRR Growth in 2024
By Danylo Proshchakov
| 24. June 2024 |
Metrics, Data
By D. ProshchakovDanylo Proshchakov
| 24 Jun 2024 |
Metrics, Data
    By D. ProshchakovDanylo Proshchakov
    | 24 Jun 2024
    Metrics, Data

    8 Proven Strategies to Boost Net MRR Growth in 2024

    “If you can’t measure it, you can’t improve it.” That’s the wise insight of Peter Drucker, an Austrian-American consultant and educator.

    With that in mind, there’s a crucial number in the world of SaaS businesses: Monthly Recurring Revenue (MRR).

    These revenues serve as the engine propelling these companies forward, offering insights into their stability, growth, and customer relationships.

    Explore in this article what MRR entails, why it’s essential for your business, and the best strategies to increase it from top companies.

    Key Takeaways:

    • MRR is crucial for companies with subscription services or SaaS products. It shows how much money the company makes regularly from its subscriptions and pricing plans.
    • MRR helps understand how financially fit a company is, boosts revenue, and makes financial planning less uncertain by predicting future income more accurately.
    • Calculating MRR is vital for business growth. It increases customers retentionand impresses investors with a steady, increasing income.

    What is MRR?

    Monthly Recurring Revenue (MRR) is a crucial financial metric that refers to the consistent income a company receives on a monthly basis.

    It is widely utilized by companies offering subscriptions or software services (SaaS), as it is calculated based on those subscriptions and pricing plans.

    This metric is essential for these companies, showing the business’s health and performance. It helps you track how your revenue evolves over time.

    Let’s explore its importante more in detail.

    Why is MRR Important?

    By tracking and analyzing your MRR, you can gain several meaningful benefits that directly affect your company:

    • Know your financial health: It provides a clear view of your company’s financial stability, indicating whether recurring revenue is sufficient to cover costs and generate profits.
    • Increase your revenue: With this data, you can more easily measure your monthly growth and achieve your goals by identifying trends and patterns. For example, if you notice a pattern where revenue increases significantly in certain months due to promotions or product launches, you can plan more similar activities for those periods.
    • Reduce uncertainty: By more accurately predicting your future revenue, financial planning becomes easier.
    • Retain and attract more customers: It provides insights into customer behavior and churn rates, helping you improve your strategies to attract and retain customers.
    • Attract more investors: A high and growing MRR can attract investors, as it demonstrates a stable and sustainable revenue stream.

    6 MRR Types

    #1 New MRR

    It refers to the additional income you receive each month when a new customer joins your service or starts paying monthly for it. Each new customer adds more monthly recurring revenue and increases your total MRR.

    #2 Expansion MRR

    It relates to the additional MRR coming from existing customers who have upgraded their plan or purchased additional products through upsells, cross-sells, and add-ons.

    #3 Reactivation MRR

    This type of MRR refers to the revenue from customers who have paused or deactivated their subscription and then reactivated it.

    #4 Churn MRR

    It indicates the total recurring income that a business has lost due to customer subscription cancellations during a month.

    #5 Contraction MRR

    It is the amount of money that a company loses in a month because some customers cancel their subscription or downgrade to a cheaper plan. Therefore, it includes Churn MRR.

    #6 Net MRR Growth Rate

    The monthly growth rate of net recurring revenue (MRR) measures how much your business’s net income increases each month. It’s an important way to see how quickly your software-as-a-service (SaaS) company is growing.

    MRR changes when you gain new customers or lose some, and this rate shows you how much it changes in total each month.

    To calculate it, you first have to calculate the net MRR using the following formula:

    following formula

    Net MRR = (New MRR + Expansion MRR) – Contraction MRR

    For example, imagine you have $30,000 of New MRR, $5,000 of expansion, and $3,000 of churn.

    Net MRR = (30,000 + 5,000) – 3,000 = $32,000

    Once you have the Net MRR, you can calculate the net MRR Growth rate with this formula:

    following formula

    (%) MRR Growth Rate = [($ Net MRR Month B – $ Net MRR Month A) / $ Net MRR Month A] X 100

    For example, if you have $20,000 of MRR the first month and $30,000 the second month, your growth rate would be 50%.

    [($30,000 – $20,000) / $20,000] X 100 = 50%

    How to Use MRR Calculations to Grow?

    Calculating your MRR will help you set goals for the future and create strategies to achieve them. 

    Understanding MRR is crucial and can be used for business growth, providing valuable insights in these areas:

    Product-market Fit

    MRR serves as a compass, guiding you and providing clues about how your product or service is adapting and being accepted by the market. 

    For example, stable or growing MRR suggests that you’ve found a market segment willing to continuously pay for your solution.

    Product and Sales Teams

    Increasing MRR indicates that you’re offering something valued by customers. However, decreasing or stagnant MRR may indicate product issues that needto be addressed. 

    Sales teams can use MRR to focus on acquiring high-quality customers willing to pay more over the long term.

    Critical Financial Metrics

    MRR is financially critical as it offers a clear view of a company’s monthly recurring revenue, aiding effective planning and management. 

    Furthermore, it’s an important sign of how well your business is growing and helps you understand your financial situation better. This means you can make smarter choices about where to invest and what strategies to follow.

    3 key metrics to use with MRR

    By combining MRR with other metrics, you get a more comprehensive picture of business performance. Here are three metrics to consider alongside MRR:

    Customer Lifetime Value (CLV)

    CLV is the amount of revenue a customer will generate for your business throughout their entire tenure as a customer. Essentially, it’s an estimate of the total value a customer brings to your company.

    Churn

    High churn typically means less MRR, but sometimes MRR can increase if remaining customers pay more.

    Net Revenue Retention (NRR)

    NRR shows how much money your company has retained from current customers, considering changes in their consumption or if they churn. 

    If NRR is over 100%, it means your company has managed to maintain or increase revenue from existing customers, even after factoring in losses. However, if it’s under 100%, it indicates a revenue contraction.

    8 Ways to Increase Net Monthly Recurring Revenue

    You’re probably wondering how to boost your net monthly recurring revenue. 

    Rather than offering theoretical advice, we’ve gone straight to the source: companies. They’ll share 8 strategies they’ve used to increase net MRR and the challenges they’ve found.

    #1 Increase Prices

    In our experience, raising prices is the quickest way to boost MRR. While this approach has limitations, many companies undervalue their services.

    The biggest challenge

    Achieving a predictable pipeline is tough in today’s economic climate. Many teams are cutting costs and feeling pressure to save money while buying decisions involve more stakeholders than before.

    How to leverage customer data to boost MRR

    Focusing on Ideal Customer Profiles (ICPs) to identify and prioritize the types of customers who are best suited for your products or services. By tiering countries and retargeting the content strategy, you can reach your target audience and drive growth in MRR.

    #2 Create user-centric content

    Socialpilot believes the best way to increase net MRR is by creating user-centric content and prioritizing user needs over algorithms. Continuously updating content based on user feedback improved their site traffic and conversions, boosting their Net MRR sustainably over time.

    The biggest challenge

    User churn, which you can address by enhancing your onboarding process and providing personalized support. This approach reduces churn and underscores the value of proactive customer engagement.

    How to leverage customer data to boost MRR

    Incorporate a ‘Request New Feature’ button inside the app can help you understand customer needs directly. For example, enhancing your analytical capabilities with detailed engagement metrics, as requested by users, improves satisfaction and retention, boosting your MRR.

    #3 Segment Your Customers and Personalize

    Ranktracker boosted revenue by targeting high-value customer segments with personalized onboarding and exclusive features. This strategy increased satisfaction, significantly raised Net MRR, and built lasting customer relationships for sustained growth.

    The biggest challenge

    They agree with Socialpilot that the main obstacle is dealing with customer churn. To address this, they developed a proactive retention program that included regular check-ins, feedback loops, and a dedicated customer success team. 

    How to leverage customer data to boost MRR

    They leverage customer data through advanced analytics and feedback systems. For instance, analyzing usage patterns revealed frequent requests for a specific feature. Implementing this feature increased product adoption and upsells, directly boosting their Net MRR. 

    #4 Focus on Customer Retention

    According to Ortto, making an intentional, company-wide effort to drive customer retention directly contributes to an increase in net MRR and a more sustainable, healthy business. In the content space, this means creating content that solves our existing customer’s problems, answers their questions, and introduces them to new features and use cases within the product. 

    The biggest challenge

    Interdepartmental collaboration is crucial here — getting ideas from customer-facing teams helps generate the content the customers are looking for and means the content you produce is shared directly with your customers.

    How to leverage customer data to boost MRR

    In measuring success, your customer data plays a crucial role. Centralizing your data in a customer data platform (CDP) allows you to track the entire customer journey and pinpoint opportunities to enhance retention efforts.

    #5  Implement Personalized Upselling and Cross-Selling

    Artwork Flow significantly increased their Net MRR by implementing personalized upselling and cross-selling campaigns based on customer usage data. They used sophisticated analytics tools to identify behavior patterns and preferences, tailoring offerings to meet specific needs. 

    The biggest challenge

    Ensuring data accuracy and privacy compliance, which can be addressed by implementing robust data governance policies and regularly auditing our systems to maintain data integrity.

    How to leverage customer data to boost MRR

    By analyzing usage patterns, they found that a significant portion of their customer base underutilized certain features. In response, they created targeted onboarding materials and tutorials to educate users, which drove adoption and increased MRR as customers began to see the full value of their product. 

    #6 Introduce a Tiered Pricing Model

    Scalefusion introduced a tiered pricing model that aligned better with customer usage and value perception. They observed varying customer needs and willingness to pay across segments. Segmenting their subscription model into Essentials, Growth, Business, and Enterprise tiers allowed them to meet each segment’s needs better and maximize revenue potential.

    The biggest challenge

    Overcoming initial resistance to the new tiered pricing model, which involved transparent communication with customers about benefits, personalized consultations for smooth transitions, and internal training and incentives to support adoption. Lessons include managing change with clear communication and tailored support to minimize disruption.

    How to leverage customer data to boost MRR

    Use your customer data to identify upsell opportunities. For example, if customers frequently exceed basic plan limits, consider introducing a mid-tier option with enhanced features to meet their needs and boost satisfaction and revenue.

    #7 Focusing on White-Label Prospects

    Quaderno.io achieved a passive 12.5% increase by focusing on prospects who would benefit from using their product in a white-label manner. This strategy resulted in significant revenue growth without an increase in customer support tickets, highlighting its sustainability for their small and resource-lean company.

    The biggest challenge

    Focusing on sustainable and steady growth strategies has proven more effective than chasing trends over the long term. This approach has helped them maintain a low churn rate, even with limited resources.

    How to leverage customer data to boost MRR

    If you’re not listening to customer feedback, you’re going to lose your customers sooner or later. Frameworks such as JTBD (Jobs to Be Done), for example, can give you insight into not only how to capture but, more importantly, retain customers.

    #8 Promote Annual Plan Conversion

    Billdu encouraged monthly users to switch to annual plans during price increases, urging them to lock in current rates and save money. This approach effectively boosted conversions without causing significant customer turnover.

    The biggest challenge

    The main obstacle is maintaining profitable user acquisition. Advanced segmentation using detailed LTV and CAC data is crucial. Understanding your limits is key to sustainable UA campaigns. Experiment with new acquisition channels, but make swift, data-driven decisions on when to stop.

    How to leverage customer data to boost MRR
    Your user data is critical during onboarding, especially if you offer a free trial and aim to boost conversions to paid plans. Understanding why some users opt not to continue is crucial for refining both in-app and email onboarding processes.

    Conclusion

    In this article, we’ve discovered that monitoring MRR is crucial for your company’s success, particularly if you’re in the subscription or SaaS sector.

    MRR aids in boosting your monthly income, comprehending market dynamics, and ensuring financial stability.

    By implementing targeted strategies and understanding the interplay between MRR and key metrics, you can not only expand your business but also lead your industry.

    In summary, MRR is not just a financial measure but a vital tool to drive innovation and long-term success in your business.