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MRR Sucks as Measure of Success

While I am not a big fan of Monthly Recurring Revenue – MRR, as a measure of success, I support the argument that it (or its increase) is a signal of customer interest.

That said, I, as a consumer or a business client, actually avoid those who publish MRR metrics.

Here is why:

  1. It is often published by young businesses that didn’t figure out pricing yet, and are selling at a discount to acquire new customers. So, an increase in demand can be a signal of pricing, not product quality.
  2. It does not cover churn. Yes, an increase in MRR is great, but without churn, we don’t know how much this number is bolstered by new customers that are about to drop next month, etc.
  3. It says nothing about longevity. As MRR does not cover outgoings, a company might be bleeding money and, despite impressive MRR, it might be gone in a few weeks. It’s worth assessing the risk.

So, MRR is interesting, but no, IMO it is not a metric of success.

On the other hand, the Life Time Value – LTV, that’s a sweet sweet number :*