Financial metrics allow entrepreneurs to gauge the success of their business. In the subscription business, Monthly Recurring Revenue (MRR) is one of its most important metrics.
MRR helps you keep track of your billing records and pricing plans in a particular month to show whether your income is growing or not, helping you make educated decisions about budgeting and investing.
But, in a subscription-based business, you will always have new customers signing up and some existing customers churning out. So, you can expect to have a constant fluctuation in your revenue.
What is Monthly Recurring Revenue? (MMR)
Monthly Recurring Revenue (MRR) is the predictive measure your business will make from all the active subscriptions in a month. In other words, it gives you the exact status of your current performance and can accurately predict your business’ future revenue.
For example, if you have ten (10) customers paying $30 for your product or service per month, you would have an MRR of $300.
Read more: 9 Customer Retention Strategies for Small Businesses
How to Increase Your Monthly Recurring Revenue?
Your MRR is highly dependent on the number of your customers and the amount they’re paying you for their subscription. Here are some tips for improving your recurring revenue.
Raise your price
As a marketing strategy, many businesses are underpricing themselves to gain an advantage over their competition. But in reality, offering underpriced plans devalues your product and hard work for less income.
Increasing your price can almost automatically increase your MRR, as long as you make sure to improve your product or service as well. You may end up losing your existing customer with a price hike, but if they appreciate the value and quality of your product, they will stay.
Upsell at the right opportunity
Acquire more revenue from your existing customer base by upselling them to a premium plan. This means offering them upgrades or add-ons, adding value and efficiency to your product, and charging them for it.
When your customers need your additional features, that’s the time to upsell them. You’ll be surprised how much people are willing to pay, especially for products and services that provide value.
Offer prepayment options
Prepayment plans are an effective way to improve your MRR and your customer retention. If you want to retain your customers, offer them prepayment plans that will urge them to stay with you for more than a month.
For example, offering your clients annual payment plans guarantees a subscription to your product or services for at least one year, potentially yielding a higher net gain over time.
Eliminate free plans
While free plans can attract new clients to try your product, offering something at no cost has minimal incentive for them to pay anything at all. Besides, customers consider paid products more valuable than free products. Another glaring issue with offering plans for free is that free users will stay as free users, causing you to spend your resources on customers who aren’t contributing to your revenue.
Read more: 7 Customer Success Metrics You Should Track
Conclusion
MRR is one of the best financial metrics that can help determine if your sales and marketing efforts are working. And when you understand how recurring revenue works, you’ll know that improving your sales, acquisition, and retention strategies are crucial factors that can help increase your MRR. Keeping an eye on your MRR allows you to budget and make plans for the future of your business.
