What is CMRR? An awesome guide to committed MRR
What is CMRR
Committed MRR (monthly recurring revenue) or CMRR is a predictive SaaS metric that combines actual monthly recurring revenue with known bookings, churn, and downgrades/upgrades.
In simpler terms, CMRR is an estimate of the amount of recurring revenue that will be collected the following month.
The difference between CMRR & MRR
The main difference between MRR and CMRR is that the latter reduces the recurring revenue from cancellations and downgrades. While MRR provides insights into the current run rate of SaaS business, CMRR incorporates potential future changes in recurring revenue. MRR doesn’t consider expected cancelations or upgrades/downgrades and therefore gives a gross overview of the revenues.
This SaaS metric allows businesses to forecast their performance and revenues based on the available customer data. To calculate committed monthly recurring revenue, you simply add new books to the existing MRR and subtract known cancellations and downgrades.
If you have 100 customers, each paying $200 per month in subscriptions. For the next month, you have a guaranteed MRR of $2000 and an expected churn of $500.
Your CMRR for the next month is $20,000+$2000-$500 =$21,500.
What's included in CMRR
Existing MRR – You’ll still need to include the existing MRR of your business in calculating committed MRR.
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 looks at the Existing MRR, (New bookings + Expansion – Downgrade bookings – Churn), then takes out revenue that’s likely to churn within the period under review. However, 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. It’s used by lenders to determine the amount of credit to extend at any given period. Committed MRR also helps investors to gauge the performance of a business.
Committed MRR can help SaaS sales managers to look at the bigger picture and make more accurate sales forecasts and projections. This allows SaaS businesses to plan for growth in the short-term and long-term.
With the right analytics tools, SaaS businesses can keep an eye on committed MRR for purposes of informed decision making. FirstOfficer provides SaaS businesses with the latest metrics for monitoring MRR.