Want to bring your subscription-based mobile business to a higher level and attract more investors? Read this article to discover how monthly recurring revenue (MRR) can help you to do that.
Did you know that Wall Street investors give a higher valuation to companies with a predictable monthly profit? It makes total sense because a company with a stable income means fewer risks for investment. Investors want to know that your product has a demand on the market. That it's predictable, scalable, and worth their money.
So, if you're wondering how you can make your subscription-based business more appealing to them and increase your app's stock price, this article is exactly what you need.
In our previous blog posts, we have already covered how you can improve your business with the churn rate and ARPU with ARPPU. But today, we'll focus on MRR, a metric that you should keep a close eye on if you have a subscription app. So, let's dive in!
MRR is an income that your business receives every month. It's predictable, and that's what makes this metric so important.
MRR serves as the basis of your company that provides actual data on your app's financial performance. If you know how much money your business is making monthly, you can anticipate how big your sales will be and what the cash flow dynamics will look like in the following months.
Tracking MRR enables you to forecast your company's revenue and compile an accurate financial forecast, which is critical for your app's growth. You can discover why your business is growing or declining, and what is the reason behind it. Basically, if you're questioning how "healthy" your business actually is, MRR is the answer.
With this key metric, you can wisely plan your budget and decide when is a good time to launch a new product or feature. You'll understand which customers to target and for what purpose. Knowing all the pitfalls, you'll be able to make smart business decisions. And, most importantly, convince new investors that your project is worth a shot.
Calculating MRR is pretty simple. All you have to do is just multiply the total number of paying users by the average revenue per user. Here is the formula to make it sound even easier:
MRR = Number of customers x Average revenue per customer
There are various strategies that can speed-up your MRR growth but that's what we recommend you do.
Also, stop underestimating your product and increase the price. The rise doesn't have to be drastic but it's totally worth it to increase it by at least 5% and see how your customers would react.
Besides, you should eliminate anything that is "unlimited" in your packages. This approach worked perfectly for raising awareness but it doesn't generate revenue in the long term. And, last but not the least, revise your strategy to boost your leads! At the end of the day, the more customers you have, the higher your MRR will be. While increasing sales and boosting profits is exactly what your investors want to see.
In Apphud, we calculate MRR as a sum of the monthly fee from every paying customer subtracting the Apple / Google commission. What does it look like practically? Well, if you have 10 customers paying $10 per month, your MRR will be equal to:
MRR = 10 subscribers × $10 per month - 30%(or 15%) Store Commission = $70.
All non-monthly subscription plans are being normalized into a monthly plan. For instance, if an annual subscription costs $120 per year, it will be normalized into $10 per month.
In this article, we told you how to boost your MRR to look credible in the eyes of your investors and feel more confident in predicting your business' success. As you can see, increasing MRR has its difficulties and can be challenging but it's not impossible. But if you're still wondering how to improve your MRR, let us help you out!
In Apphud, we track more than 20 metrics, including MRR, and we assure you that with this data you'll be able to achieve your biggest goals! You'll have access to all important information stored in one place. It's convenient and time-saving.
Forget about coding or missing important notifications. We'll always keep you posted about the most important updates and you can reach out to us any time you want! Sign up for FREE and try it out yourself!