What is CMRR? An awesome, 5-minute guide to a powerful metric

Mark Henderson

What is CMRR?

Committed monthly recurring revenue (CMRR) is an updated, potentially more accurate version of the popular monthly recurring revenue (MRR) metric that is popular with SaaS entrepreneurs. 

It typically combines your baseline MRR with any new bookings your business might have made during the reporting period, expected churn, and any potential downgrades or upgrades to come up with a more realistic picture of recurring revenue.

When you’re asking “what is CMRR,” really what you’re asking is, how can I adjust MRR to better understand the future?

Put in even simpler terms, CMRR is a more subjective, but also potentially more accurate estimate of the amount of recurring revenue that your subscription product will collect the following month. 

The difference between CMRR & MRR

What is CMRR? While MRR provides insight into the current run rate of a SaaS business, CMRR is a more speculative metric that tries to anticipate any future changes in recurring revenue. 

For example, MRR doesn’t take into account any expected cancellations or downgrades for this month. That might be fine if you’re just starting out. 

But if you’ve been in business for a while and start to notice that your customers are leaving or downgrading at a predictable rate, updating MRR to get CMRR could give you a better sense of future revenue.

While MRR is more objective, CMRR involves a lot more judgment: there’s no one right way to do it. 

Some businesses will be very conservative with the way they come up with CMRR—perhaps only adding in potential churn, and leaving potential upgrades and downgrades alone if there’s no established pattern. 

Others might approach CMRR calculations more boldly, making big assumptions about new subscriptions, churn, upgrades and downgrades.

what is CMRR

 

Example

Let’s say you have 100 customers, each paying $200 per month in subscriptions, giving you an MRR of $20,000. 

Let’s say that after looking at your financials for the last few months, you’ve decided it’s safe to expect a churn of $1,200 for this month, and $2,400 in new bookings. 

You don’t, however, see a pattern in upgrades or downgrades: some months you’ve got dozens off each, while some months almost no one upgrades or downgrades

That means that your CMRR for the next month is $20,000+$2,400-$1,200 =$21,200. 

What's included in CMRR

Although there’s no one right way to calculate CMRR, most people will at least consider including the following variables when they calculate it:
 
  • Existing MRR – This is the one variable you can’t do without here.
  • New bookings –This is guaranteed monthly recurring revenue associated with new leads that convert to paid customers in a given time period. For example, if a customer has signed a contract which comes into effect in the following month, this new booking can be included in a CMRR calculation. 
  • Guaranteed expansion – This describes increased MRR from existing customers as a result of upgrades or additional subscribers. For example, if an existing customer is on a plan that requires them to upgrade after a given period of time, the expected expansion MRR can be included in committed MRR calculation.
  • MRR churn –This is the anticipated churn from customers who cancel or fail to renew their subscription in the following month. However, MRR churn is not 100% guaranteed as SaaS businesses still have the chance to convince customers to renew their subscription.  
  • Downgrade bookings – These include any decreases in MRR from existing customers due to downgrading to a lower plan, discounts, or changes to a pricing model. 

CMRR Forumla

If you were to include all off the variables we just named in a CMRR calculation, your formula might look like the following:

CMRR = MRR + New bookings + Guaranteed Expansion – Downgrade bookings – Churn

However, as we mentioned, there are no fixed rules on what can be included in the calculation of committed MRR.

Why is CMRR Important

Committed monthly recurring revenue provides a more precise prediction of income than MRR. 

Lenders will often use CMRR to determine the amount of credit to extend to a business at any given period. Committed MRR also helps investors to gauge the performance of a business, and it can help SaaS sales managers to look at the bigger picture and make more accurate projections

If your SaaS businesses is looking for a way to plan for growth in the short-term and long-term, coming up with a CMRR calculation that makes sense can be a good first step.

What is CMRR? It’s impossible to know for sure without solid SaaS analytics. FirstOfficer provides SaaS businesses with the latest metrics for monitoring MRR, making it easier to calculate metrics like CMRR.