What Counts as MRR at an MSP
MRR is the contracted revenue that bills every month without being sold again: managed services agreements, security bundles, backup, and other subscriptions you deliver. The metric definition, formula and targets live on the monthly recurring revenue KPI page. This entry covers the judgment calls about what belongs in the number.
| Counts as MRR | Does Not Count |
|---|---|
| Per user or per device managed services fees | Project fees, even if invoiced monthly |
| Security, backup and monitoring subscriptions | Hardware sold on a payment plan |
| Recurring vCIO or compliance retainers | Hourly and block time billing |
| Resold licenses on a recurring contract (tracked separately) | One off setup and onboarding fees |
Resold licensing is recurring but low margin, so many MSPs report it as a separate line. A dollar of Microsoft licensing and a dollar of managed services are not worth the same to a buyer or to your cash flow.
Why the Number Drives Decisions
MRR pays your fixed costs and is what a buyer values most, which is why it anchors an MSP valuation. The valuation calculator shows how recurring revenue changes the picture compared with project heavy revenue. Watch it alongside:
- Recurring revenue as share of total, which shows how dependent you are on winning projects.
- Net revenue retention, which shows whether existing clients grow or shrink.
- Largest client share of revenue, because MRR concentrated in one client is a risk, not a strength.
Growing MRR Without Buying It
New logos are only one lever. Price increases, adding services to existing clients and moving hourly clients onto managed agreements all grow MRR, often with better margin than a new client who needs a full onboarding. Pricing models are compared in how MSPs price their services, and the renewal cost worksheet helps when rising vendor costs need to pass through at renewal.
Contraction matters as much as growth. A client who drops users, removes a service or negotiates a lower rate at renewal shrinks MRR without leaving, and that loss is easy to miss in a total that is still rising because of new sales. Track new, expansion, contraction and churned MRR as separate movements each month so you can see which one is actually moving the number. A healthy book shows expansion from existing clients outpacing contraction, with churn as the smallest line.
The warning sign is MRR rising while gross margin falls. That usually means growth came from underpriced agreements or from resale, and it shows up later as a team that is busier without the business being healthier. Check both together against what gross margin you should target before celebrating a record month.
Common Questions
Is MRR the same as ARR divided by twelve?
Usually, if both are measured on the same contracts. ARR is common in software and valuation talk, while MSPs tend to track MRR because agreements bill monthly.
Should one-time onboarding fees count toward MRR?
No. They are real revenue but they do not repeat, so including them overstates the run rate.
How do I count a client who pays annually?
Divide the annual contract value by twelve and count that each month. The cash arrives once, but the service and the revenue are recurring.
When does a lost client leave MRR?
When the agreement ends, not when notice is given. Track the notice separately so you can see churn coming before it hits the number.