MRR & ARR Growth Simulator
Enter your starting MRR, monthly new MRR, churn rate, and expansion rate to simulate how your Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) will grow over time. Includes net churn rate and a growth chart.
Typical monthly churn rate by customer segment
| Customer segment | Typical healthy monthly churn rate |
|---|---|
| Enterprise (large accounts, mostly annual contracts) | Under 0.5% |
| Mid-market (mid-sized companies) | 1% – 2% |
| SMB (small and mid-sized businesses) | 3% – 5% |
| Self-serve / consumer (mostly credit-card billing) | 5% – 7%+ |
Note: larger contracts with multi-stakeholder cancellation decisions tend to churn less. These figures vary widely by industry and product, so treat them only as a rough reference.
What this MRR and ARR simulator does
Start from your current monthly recurring revenue, add the new business you win each month, the revenue you lose to churn and the revenue you gain from expansion, and this tool projects how MRR and ARR move over the months ahead. It shows net churn and a growth chart alongside, so you can see where the current conditions land you if nothing changes.
**The first thing worth settling is that ARR is not a forecast of next year's revenue.** ARR is the current month's MRR multiplied by twelve — **a snapshot of the present, expressed as what a year at this level would amount to**. Put it into next year's budget and you are treating a figure that accounts for none of the churn or new business of the coming twelve months as though it were a revenue projection. Comparing ARR against last year's reported revenue is a common habit, and the two are simply different kinds of number.
**The second is that only recurring revenue belongs in MRR.** Setup fees, bespoke development and consulting are one-off, and mixing them in makes MRR jump in one month and fall back the next. Dividing an annual contract value by twelve and adding it in causes the same trouble.
**And net churn can hide very different realities behind the same figure.** A company at five per cent churn and three per cent expansion nets out at two, and so does one at twelve per cent churn and ten per cent expansion — but the second is losing more than one customer in ten every month, and will contract sharply the moment expansion slows. Read the components, not only the net.
How to use it
- Enter your current MRR **Exclude one-off revenue and count only what recurs every month.**
- Enter new MRR per month This is what new contracts add. Increases from existing customers do not go here.
- Enter churn and expansion rates **Use revenue-based rates, not customer counts.** Differences in contract size change the answer.
- Choose a horizon and read the chart **If net churn is positive, the business starts shrinking the moment new business stops.**
Tips for getting more out of it
- Enter churn rate as the share of MRR lost to cancellations (revenue churn), not the raw percentage of cancelled accounts — this better reflects the impact of losing high-value customers.
- When your expansion rate exceeds your churn rate, you get "negative churn" — MRR keeps growing from existing customers alone, even with zero new business. The result panel flags this automatically. It is one of the most sought-after states for SaaS companies.
- Set new MRR to 0 and vary only the churn and expansion rates to isolate how healthy your existing customer base is, independent of new acquisition.
- The simulation period supports up to 60 months (5 years). For quarterly or annual planning, try comparing multiple periods such as 12 and 36 months for a more accurate picture.
When this is useful
Informing hiring and investment decisions
**Knowing which level you reach and when tells you what you can commit to spending ahead of it.**
Estimating the value of reducing churn
Compare a one-point improvement in churn against the equivalent effort spent winning new business.
Preparing material for investors
It lets you state the ARR definition and the assumptions behind it explicitly.
Testing a price change
**Enter the increase as expansion and the departures it causes as churn, in the same run.**
Terms used here
- MRR
- Monthly recurring revenue. **The sum of revenue that repeats every month, excluding anything one-off.**
- ARR
- Annual recurring revenue. **Current MRR times twelve — a snapshot of today, not a projection of next year.**
- Churn rate
- The share of last month's MRR lost to cancellations and downgrades, measured in revenue terms.
- Expansion rate
- The share added by existing customers increasing their spend. **When it exceeds churn, the business grows with no new customers at all.**
- Net churn
- Churn minus expansion. **The same value can describe businesses of very different stability.**
- One-off revenue
- Setup fees, bespoke work and similar non-repeating income. **Mixing it into MRR makes the monthly series erratic.**
Frequently Asked Questions
Side Note — The "leaky bucket" problem in SaaS
MRR growth in a SaaS business is often compared to filling a bucket with water. New MRR is the water flowing from the tap; churn is a hole in the bottom of the bucket. No matter how hard you turn up the tap, a big enough hole means the water never accumulates — and in the worst case, a company can keep signing new customers while its total MRR still shrinks, a pattern sometimes called a "death spiral." This is precisely why SaaS companies invest as heavily in retention (onboarding and customer success) as they do in new customer acquisition.
When expansion revenue from upsells and cross-sells outpaces churn, a company achieves "negative churn" — MRR keeps growing organically from the existing customer base alone, even with zero new sales. Usage-based and seat-based SaaS products like Slack or Datadog are well known for making this easier to achieve, since revenue naturally grows as usage spreads within an existing customer's organization.
MRR and ARR became standard metrics in investor materials largely because of the SaaS IPO and fundraising boom of the 2010s. A single year of total revenue says little about whether that revenue will repeat next month, but recurring revenue — by definition — keeps flowing as long as customers don't cancel, which is why it became the go-to measure of a subscription business's sustainability.