Monthly recurring revenue

Monthly recurring revenue is the total predictable monthly income an MSP receives from active client contracts. It excludes one-off project fees and variable usage charges, and it is one of the main drivers of an MSP's valuation.

Also known as: MRR, recurring revenue
Category: finance
Source: MSP Agenda editorial methodology

Monthly recurring revenue, usually shortened to MRR, is the income an MSP can count on receiving each month from contracted services. It is the single most watched number in a saleable MSP because buyers pay a higher multiple for stable, recurring income than for project revenue.

Why it matters to MSPs

MRR determines how predictable the business is. High MRR growth with low churn makes forecasting easier, hiring safer and valuation higher. A declining or stagnant MRR is usually the first sign that client acquisition or expansion is broken.

MRR is calculated by adding up the monthly value of all active recurring contracts. Annual contracts are divided by twelve. One-off project fees and pass-through hardware are excluded because they are not repeatable.

Client expansion — Client expansion is the practice of increasing monthly recurring revenue from existing MSP clients by adding services, moving them to a higher tier or selling outcomes tied to business priorities.
EBITDA multiple — An EBITDA multiple is a valuation ratio applied to a company's adjusted earnings to estimate its enterprise value; MSP multiples vary with recurring revenue quality, growth and client concentration.
Exit readiness — Exit readiness is the condition in which an MSP can be presented to buyers with clean financials, transferable operations, diversified revenue and a defensible valuation model.

EBITDA Multiple
An EBITDA multiple is one of the simplest ways buyers estimate what a business is worth. They take the adjusted earnings before interest, tax, depreciation and amortisation and multiply by a number that reflects risk, growth and transferability.
Service Profitability
In the MSP world, there is a massive difference between having a busy team and having a profitable business. You can sign every client that walks through the door, keep your engineers slammed with tickets, and hit record revenue numbers—and still find yourself with razor-thin margins at the end of the quarter.
MSP Valuation
For most MSP owners, the business is more than just a source of income; it is likely your largest financial asset. However, a business is only worth what a buyer is willing to pay for it, and in the world of managed services, that price isn't a random number.
Contract Renewal Rate
In the world of Managed Service Providers, few metrics speak as loudly as the Contract Renewal Rate. While many founders focus heavily on top-line growth and new client acquisition, the long-term enterprise value of an MSP is built on the foundation of recurring revenue and client longevity.
Billable Utilisation
In the world of Managed Service Providers, Billable Utilisation is the pulse of the business. It is the metric that tells you whether your technical team is generating revenue or simply costing you overhead.

Why it matters to MSPs

Related terms