Monthly Recurring Revenue is crucial for subscription-based businesses, indicating predictable monthly revenue and financial health. For Product Managers, it guides strategic decisions, product development, and customer management, essential for forecasting growth, assessing scalability, and optimising customer satisfaction and revenue.
Methodology:
- Identify recurring revenue sources,
- Segment revenue sources,
- Calculate Monthly Recurring Revenue for each segment,
- Aggregate Monthly Recurring Revenue,
- Adjust for new additions, churn, and expansions,
- Adjust trends and insights.
Benefits:
- Predictable financial planning,
- Performance tracking and growth measurement,
- Investor attractiveness and valuation.
Limitations:
- Does not account for churn or customer lifetime value,
- Potential for short-term focus,
- Complexity in revenue recognition.