How To Forecast Your Monthly Recurring Revenue (MRR)
Forecasting your MRR is important to growing your SaaS business. Being able to project your sales can help you understand where your company will be in the future, and how much money you could potentially earn in the future. You'll be able to plan for expenses and make strategic service decisions that can help take your company to the next level.
MRR stands for monthly recurring revenue, and it's an important metric for your SaaS business.
MRR is a measure of the amount of money you make from your subscriptions each month, or how much you can expect to earn from those subscriptions in the future.
The easiest way to understand MRR is to think about it as your recurring revenue—the amount of money you have coming in every month without having to do anything new. The higher your MRR, the more stable your business will be!
Forecast Growth Based on Historical Data
You should forecast growth based on historical data because it is the most accurate and reliable way to predict future growth.
First, consider the past. If you have a long-term history of growth, you can extrapolate that data to predict how your business will perform in the future. This method is not perfect, but it has been proven to be more reliable than any other method.
Second, consider how aggressively you want to grow. If you are looking for aggressive growth, this method is best suited for what you're trying to achieve. You can use historical data to determine how much growth is necessary before your company reaches its maximum potential size.
Be Honest with Yourself about Future Growth
I'm sure you've heard the old saying: "The sky is the limit." And while it's true that there are no limits to how high your business can go, it's important to be realistic and honest with yourself about how much growth you can expect over time.
It's easy to get caught up in the hype of a new product or service and dream of all the money you'll make. But if you're not careful, those dreams can end up becoming nightmares if you don't set reasonable goals for yourself.
Your first year of business might not be as profitable as you expect. This is especially true for companies just starting out; but even established SaaS businesses have their share of surprises. It's important to know what those surprises might look like so that you don't get discouraged when they happen (and they will).
Be Aware of Your Churn Rate
If you're not paying attention to your churn rate, then you're missing out on a big opportunity.
Churn rate is the percentage of customers that leave your business over a specific period of time. It's important because it gives you an idea of how many customers are leaving and why they're doing so. If your churn rate is high, then it means that a lot of people are leaving your service or product—and if you don't know why, then you won't be able to fix it!
That's why we recommend always being aware of your churn rate and working towards reducing it as much as possible. It will allow you to stay on top of the problems that are causing people to leave and make sure that everyone who is using your product or service is getting everything they need from it.
Forecasting Your MRR Is Important to Growing Your SaaS Business
When you forecast your MRR, you're making an educated guess about how much money you can make in the future. It's a vital step in deciding whether or not to expand your SaaS business. If forecasting your MRR comes with a serious risk of failure, then it won't help you decide if your current business model is worth continuing. There are many different ways to calculate MRR, so remember the tips above and good luck with your growth!