What is MRR, and how do you calculate your brokerage?

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Making an earnings forecast is very important to keep the company’s finances organized and prevent future problems, and a great way to make this forecast is using the MRR, and in this article, we will explain what this index is and why it can be very important for your broker.

What is it?

The MRR is the Monthly Recurring Revenue, translated as Monthly Recurring Revenue, which uses the calculation of the company’s earnings through monthly subscriptions of its customers. This index helps to measure the initiation, renewal, and cancellation of subscriptions allows the analysis of the company’s growth and its future profits. In addition, the index can help identify sectors that need resources to optimize their sales.

How to calculate?

Calculation number 1:

In this way, the calculation is based on the monthly payments that your broker receives from each customer, corresponding to the fixed monthly amounts paid by service subscribers. This means that your broker’s MRR is the total amount received by customers who pay fixed subscriptions.

Calculation number 2:

We will call this calculation MRR=T*V, as it is done through a basic multiplication: o Total active customers X o Amount paid for monthly subscriptions, and of course, the value of each subscription. From this calculation, you can add the new MRR, add MRR, and cancel MRR to compare your broker’s MRR change month by month. 

With this, it will be possible to monitor billings and prevent possible financial problems.

MRR growth

To follow the growth of the MRR, it is necessary to be aware of other important indices:

MRR New:

These are earnings from new customers who have recently signed up for services. Therefore, it will be counted from the following month, counting on the amount that each new customer is paying for the service they subscribed to.

Additional MRR

These are the gains acquired through upgrades to the Costco auto insurance plans of those who were already customers; for example, a customer went from a basic plan to a complete plan, paying a higher amount, that is, the calculation will be made from the following month counting with the amount that the customer will pay in the new plan or service.

MRR Canceled:

These represent losses from customers who canceled subscriptions or services or even reduced plans and service subscriptions. Therefore, it must be counted from the following month considering the new amount paid to the customer who reduced the plan and the losses due to service cancellations.

Therefore, we use the formula N+AC=MRR to calculate the growth of your broker’s MRR; this formula represents the following calculation:

New MRR + Additional MRR – Canceled MRR = MRR Growth

From this calculation, it will be possible to monitor the growth of your brokerage firm, compare the numbers with those of previous months and assist in the identification of future gains and investments.

MRR is important to maintain the financial health of your brokerage, predicting future increases or losses in billing. This index will also help you understand the reasons why revenue is falling and help you create strategies to improve the scenario, and customer loyalty plans to increase revenue. In addition, with the calculation done correctly, it is possible to predict future earnings and thus think about new investment possibilities for your brokerage.

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By aamritri

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