MRR & Revenue Multiples

What is monthly recurring revenue?

Monthly recurring revenue (MRR) is recurring subscription revenue expressed as a monthly amount. Normalize each billing period before adding the subscriptions together.

One-time purchases and setup fees are not recurring subscription revenue. Check how the source system treats discounts, trials, cancellations and taxes; use a consistent definition when comparing businesses.

What does annualized MRR mean?

Multiplying current MRR by 12 gives an annualized recurring-revenue run rate. It projects the present monthly level across a year; it does not establish what the business actually earned in the previous 12 months.

How is the asking-price multiple calculated?

For a listing with an asking price and positive MRR, divide the asking price by 12 times current MRR. Compare listings only after confirming that the underlying numbers use the same definitions.

If MRR is zero or unavailable, this calculation is not a meaningful revenue multiple. Ask for the underlying records rather than treating a missing or zero figure as a valuation signal.

Why is a revenue multiple not a profit multiple?

Revenue is measured before operating costs. Profit depends on the expenses included, the accounting period and whether costs such as the founder’s time have been accounted for.

A multiple based on annual revenue and one based on annual profit are different measures. Ask which measure is being used before comparing asking prices or quoting a benchmark.

What makes a multiple useful?

There is no universally fair revenue multiple. Retention, margins, customer concentration, product dependencies, workload, growth and the strength of the evidence all affect a buying decision.

Use a multiple to organize questions. Then use financial records, product review and a transfer plan to understand the business behind it.

For source definitions and reporting behavior, see Stripe Billing analytics. Reports from other providers may use different definitions.